| Market Reports

The Weekly Hash – July 22-26

Check out this past week’s happenings in the world of Crypto with the experts at Kraken.

This digest is prepared for informative purposes only and does not represent an investment recommendation or investment advice. Please see our full disclaimer at the bottom for more information.

See below all the important happenings this week in the world of crypto, presented by the experts at Kraken:

  1. QuickBit: Crypto Exchange QuickBit Confirms Data Breach May Impact 300K Users
    • Swedish crypto exchange QuickBit allegedly leaked 300k customer records via an unprotected MongoDB database 
    • QuickBit said that an outside contractor left the data unprotected while attempting a security upgrade, “QuickBit has recently adopted a third-party system for supplementary security screening of customers. In connection with the delivery of this system, it has been on a server that has been visible outside QuickBits firewall for a few days, and thus accessible to the person who has the right tools…During the delivery period, a database has been exposed with information about name, address, e-mail address and truncated (not complete) card information for approximately 2% of QuickBit’s customers”
    • The records contained full names, addresses, email addresses, user gender, and dates of birth, however, the records didn’t expose passwords, SSNs, and crypto keys
    • The report added, “In addition to those records, we also discovered 143 records with internal credentials, including merchants, secret keys, names, passwords, secret phrases, user IDs, and other information”
    • Link to Coindesk’s report
  2. Cointelegraph: Bank of America Files Patent for Settlement System Citing Ripple
    • Bank of America (BoA) filed for a patent for a DLT-based settlement system as an interbank communication tool that would enable real-time settlement between parties
    • The network would verify the identity of the payer and the payee, and would enable communication between the institutions
    • The patent filing contains multiple illustrations that explicitly cite Ripple’s DLT
  3. Riddle & Code: Riddle & Code Launches Hardware Car Wallet With Mercedes Parent Firm
    • Daimler, the German multinational corporation behind Mercedes-Benz, partnered with European blockchain interface solutions startup Riddle & Code to provide an open car hardware wallet solution
    • Car wallets have a wide variety of use cases, such as car-sharing, autonomous vehicles, real-time exchange of secure traffic data and with smart city environments to reduce congestion and lower insurance premiums
    • Riddle & Code’s CEO Tom Fürstner declared, “Autonomous cars must behave consistently to be trusted. Cars are already computing devices. A secure identity ensures that the right authorities have approved code executed inside vehicles and the trustworthiness of data exchanged. RIDDLE&CODE secures this with its cryptographic hardware and uses ledgers to turn automobiles into future market places”
    • The wallet is built around the startup’s own secure data storage solution Secure Element 2.0
  4. Reuters: Indian panel recommends cryptocurrency ban
    • An Indian gov’t panel recommended a blanket ban on all private cryptos, as well as a fine of up to 250M INR ($3.63M) and a jail term of up to 10yrs for anyone who mines, generates, holds, sells, transfers or issues crypto, “As for private cryptocurrencies, given the risks associated with them and volatility in their prices, the Group has recommended banning of the cryptocurrencies in India and imposing fines and penalties for carrying on of any activities connected with cryptocurrencies in India”
    • The panel asked the gov’t to consider the launch of an official gov’t-backed digital currency, to function like bank notes, through the RBI
    • The panel added that private digital currencies were created by non-sovereigns and lacked the attributes of currency, “There is no underlying intrinsic value of these private cryptocurrencies”
    • The committee, however, believes that blockchain possess real economic utility 
  5. Cointelegraph: Bitcoin Network Now 8 Times More Powerful Than It Was at $20K Price
    • According to data from Blockchain.com, the BTC network’s total hash rate reached an ATH of 79 TH/s on July 20th, nearly 8x greater than it was at BTC’s peak price of ~$20k in late 2017
  6. Financial Tribune: Iran Gov’t Finalizing Power Tariffs for Crypto Mining
    • Announced by Iran’s deputy energy minister for power and electricity Homayoun Ha’eri, the Economic Commission of Iran has finalized power tariffs for crypto miners, based on similar tariffs used for electricity exports
    • The decision is still awaiting the nation’s cabinet approval
    • Ha’eri didn’t specify the rates approved by the commission, but he did say that electricity export prices are variable based on several factors, including fuel prices in the Persian Gulf region
    • The report states that mining one BTC consumes as much electricity as 24 buildings in Tehran do in one year
    • Link to The Block’s report
  7. CoinDesk: Tron Founder Justin Sun Postpones Lunch With Warren Buffett
    • Tron founder Justin Sun postponed his lunch with billionaire investor Warren Buffett on July 25th, as Sun reportedly fell ill with kidney stones
    • Sun has hitherto lined up Circle’s Jeremy Allaire, Huobi’s Chris Lee, eToro’s Yoni Assia and LTC creator Charlie Lee to join him at the lunch
    • Chinese media 21st Century Business Herald claimed that the lunch was actually postponed because Sun is barred from leaving Chinese territory until accusations of illegal fundraising, porn tx facilitation, gambling and money laundering are resolved
    • Sun stated that the illegal fundraising accusations are false consider that the Tron Foundation returned funds when the Chinese gov’t banned ICOs in Sept. 2017 
    • The founder said that the money laundering accusations also have no basis since the Tron Foundation is located in Singapore, complies with local regulations, and doesn’t involve fiat on or off-ramp services
    • When it comes to Peiwo allegedly facilitating illegal porn-related txs, Sun says the company collaborates with regulators, monitors users and tries to ensure that the content is positive 
    • Sun more broadly addressed the accusations by pointing out that Tron is a decentralized internet network and that the Foundation opposes the unlawful use of the protocol, “We understand the concerns over the development of blockchain technology, and we are willing to open up and communicate to jointly promote the development of blockchain technology in China”
    • Sun attempted to falsify these rumors by posting a video of him in San Francisco
    • Link to Cointelegraph’s report
    • Link to Caixin’s report (also claims Sun is under Chinese gov’t controlled)
  8. Tusk Philanthropies: Blockchain-based, Mobile Voting is Coming to Utah County Municipal Elections
    • Utah County is collaborating with Voatz, Tusk Philanthropies and the National Cybersecurity Center to pilot the mobile voting app “Voatz” in their municipal primary election in August
    • The pilot will offer blockchain-based mobile voting to active-duty military, their eligible dependents and overseas voters using their smartphones
    • Voting began June 28th and will continue through Election Day on Aug. 13th
  9. Tehran Times: Govt. economic committee approves mechanism for mining cryptocurrencies
    • Following Iran’s announcement earlier this week that it finalized power tariffs for BTC mining, the Iranian government’s economic commission approved a measure that allows crypto to be mined within the country, which will be later discussed in a cabinet meeting for further scrutiny
    • The Deputy Minister of Energy Homayun Haeri stated that his team will create a plan to adjust the electricity rates for mining farms that will be later discussed with other ministries and submitted for approval
  10. Terpin v AT&T Mobility Moves Forward in Federal Court: Judge Refuses to Dismiss Historic $224 Million SIM Swap Lawsuit Against Telco Giant
    • AT&T Mobility will need to answer to a lawsuit filed by crypto investor Michael Terpin who allegedly lost $24M in a SIM-swapping hack, as a L.A. federal judge rejected the motion to dismiss the lawsuit against the telecoms giant
    • The plaintiff, Michael Terpin, accused the firm of enabling the $24M theft of his crypto by giving hackers posing as Terpin access to his SIM card twice, a violation of the Federal Communications Act as well as breach of contract
    • While AT&T requires customers to sign an agreement relinquishing any right to hold the company “financially responsible for its wrongful acts,” Terpin is purporting that this clause is illegal
    • Judge Wright stated, “Mr. Terpin’s claim … seeks to declare AT&T’s wireless customer agreement as unconscionable, void against public policy, and unenforceable in its entirety…Specifically, he objects to the exculpatory provision that exempts AT&T from liability from its own negligence, acts or omissions of a third party, or damages or injury caused by the use of the device”
  11. The Block: Germany’s financial regulator approves $280M blockchain real estate bond
    • Germany’s financial regulator BaFin approved an Ethereum-based, real estate bond offered by Fundament Group worth €250M (~$280M)
    • The bond, or “Real Estate Token,” is backed by a portfolio of real estate properties across Germany and securitizes a right or share certificate using a digital token
    • The token is tradeable globally at “any time they want on designated secondary markets,” with investors being able to D/W in EUR or ETH
    • Fundament co-founder Florian Glatz said the firm is preparing to tokenize other “highly attractive assets”
  12. Senate Banking Committee Hearing: Examining Regulatory Frameworks for Digital Currencies and Blockchain
    • The Senate Banking Committee will hold a hearing on regulatory frameworks for crypto and blockchain on July 30th, though it’s unclear if this will be a fact-finding mission or if any specific pieces of legislation will be discussed
    • Circle CEO Jeremy Allaire, representing the Blockchain Association; Rebecca Nelson, a member of the Congressional Research Service specializing in int’l trade and finance; and Mehrsa Baradaran, a law professor at the University of California Irvine School of Law will testify as expert witnesses
    • The hearing will be webcasted live
  13. NYDFS: NYDFS Announces New Research And Innovation Division To Oversee Crypto Licensing
    • The NYDFS established a new Research and Innovation Division that will be responsible for licensing and supervising virtual currencies, assessing new efforts to use tech to address financial exclusion, identify and protect consumer data rights, and encourage innovations in the financial services marketplace
    • Matthew Homer will lead the new division as Executive Deputy Superintendent; Matthew Siegel and Olivia Bumgardner will be Deputy Superintendents of the new division; and Andrew Lucas will serve as Counsel to the division
    • DFS Superintendent Linda A. Lacewell stated, “The financial services regulatory landscape needs to evolve and adapt as innovation in banking, insurance and regulatory technology continues to grow…This new division and these appointments position DFS as the regulator of the future, allowing the Department to better protect consumers, develop best practices, and analyze market data to strengthen New York’s standing as the center of financial innovation”
  14. CoinDesk: New York Times Confirms It’s Using Blockchain to Combat Fake News
    • The New York Times’ (NYT) News Provenance Project plans to use Hyperledger Fabric’s permissioned blockchain to authenticate news photographs in partnership with IBM Garage
    • The project aims to combat fake news, which it argues harms small and large publishers alike, “News consumers [who] are deceived and confused…eventually become fatigued and apathetic to news”
    • The NYT and partner companies will run a PoC from July until late 2019 to find a way to maintain trust in digital files
    • The project aims to store a news item’s “contextual metadata” on a blockchain, including when and where a photo or video was shot, who took it and info regarding how it was edited and published; the idea is to create a “set of signals that can travel with published media anywhere that material is displayed,” including on social media, in group chats and in search results
  15. UnionBank PH: UnionBank is First PH Bank to Use Blockchain-based Tokenized Fiat for Account-to-account Cross-border Remittance
    • Union Bank of the Philippines (UnionBank) became the first Philippine bank to successfully pilot blockchain-based remittance from Singapore to the Philippines
    • The pilot was done in partnership with OCBC Bank, Singapore’s longest established bank, using the Adhara liquidity mgmt. and int’l payments platform, as well as  UnionBank-UBX’s i2i platform to make the remittance
    • The bank used a blockchain-based tokenized fiat to remit from OCBC Bank to an account holder at a rural Cantilan Bank
    • Arvie de Vera, UnionBank senior vice president and head of the fintech business group, said, ”With the pilot’s use of i2i, rural banks can now receive direct-to-account remittances, and this is only the beginning. With this connected platform, other value added services can now be made accessible to rural banks. This empowers rural banks that were once financially excluded, with access to universal banking services”
  16. Cointelegraph: Bitcoin Payments Priority for Norwegian Air, Says Senior Executive
    • BTC payments should be coming to Norway’s low-cost airline Norwegian Air this year, after its co-founders announced they will launch their own crypto exchange, dubbed NBX, in August
    • According to Dagens Næringsliv, NBX CEO Stig A.Kjos-Mathisen said, “First, the marketplace will be launched. Then NBX will make a payment solution for the airline so that airline customers can pay with virtual currency” 
  17. The Block: Kraken Futures snags a former OTC trader to attract big investors with enticing rebates
    • Kraken hired Kevin Beardsley, ex-managing director of OTC trading platform B2C2 and ex-head of BD at digital asset investment firm Elwood Asset Management, as Head of Development of Kraken Futures
    • Since Kraken’s acquisition of Crypto Facilities in February, which was rebranded to “Kraken Futures”, the crypto exchange has been offering perpetual futures trading to clients;  volumes have surged from $1B in March to $2.5B in June
    • Kraken Futures offers a unique fee structure that grants a rebate to traders equal to 30% of the fees earned from trading, with some weeks paying out as much as $200k to their most active traders
    • Beardsley added, “What I really like about Kraken is that it is a crypto native business, so it is from the ground up built on crypto infrastructure…If you want to custody bitcoin and manage the balance of bitcoin there is quite a lot of technical infrastructure that has to be built from the ground up to make sure that it is done accurately and more importantly securely…Having worked across a wide range of market participants, I have a pretty good understanding of what people are looking for and how to meet those needs. I can say with confidence that Kraken Futures has the best quality product, and I am excited for what lies ahead”
  18. CoinDesk: Andrew Yang Super PAC Will Accept Lightning-Powered Bitcoin Donations
    • ~12 Bitcoin enthusiasts launched a crypto-friendly super PAC for presidential candidate Andrew Yang, dubbed Humanity Forward Fund (Humanity FWD), that will accept LN payments via OpenNode
    • OpenNode CEO Afnan Rahman said, “The super PAC obviously wants to receive donations as large as possible. But at the same time, individuals who want to donate just a bit to Yang’s platform now have that opportunity…It allows the donors to have all of the amount go toward the actual donation rather than miner fees”
    • Humanity FWD founder Seth Cohen said the PAC will only accept BTC donations for the first 21 days
    • Cohen added that the group hasn’t decided whether the PAC will hold BTC or immediately convert to fiat, “Potentially earning or losing money creates additional regulatory requirements”; the PAC will keep records of BTC’s volatility for each donation
    • Cohen said that OpenNode’s 1% processing fee is far lower than that of credit card processors, which want to charge the super PAC up to 4x more
  19. Ripple: Q2 2019 XRP Markets Report
    • Ripple sold a record $251.51M worth of XRP in 2Q19, a ~48% QoQ increase from 1Q sales of roughly $170M, and plans to substantially decrease future token sales 
    • Ripple temporarily paused programmatic sales and put limits on institutional sales during the quarter due to inflated trading volumes 
    • To combat concerns about overstated trading volumes, CryptoCompare will be Ripple’s primary benchmark for XRP market volume going forward
    • The company sold $106.87M through institutional direct sales and $144.64M in programmatic sales during 2Q19 
    • Ripple withdrew $1B from escrow each month over the quarter for a total of 3B XRP; of the 3B, 2.1B were reinvested into escrow contracts, and the other 0.9B used to fund XRP developments via its incubator, Xpring and RippleNet partnerships
    • The Block reported that Ripple has cumulatively sold $1.14B of XRP out of which 36% was sold to the exchanges and 64% to institutions
  20. Bitcoin.com: Venezuelan Government Accused of Using Bitcoin to Bypass US Sanctions
    •  Venezuelan President Nicolas Maduro and the United Socialist Party of Venezuela have been unofficially accused of circumventing financial blockades imposed by the U.S. gov’t with cryptocurrency alongside an airline application called Jetman Pay
    • Florida-based Jetman Pay allegedly collects airline taxes from travelers who purchase tickets from Maiquetía Int’l Airport so the Venezuelan gov’t agency Sunacrip can convert the collected tax into BTC and send to regime accounts in Russia, China, and Bulgaria
    • Venezuelan native Pedro Peroza believes that Sunacrip was implicitly built to collect taxes using various cryptocurrencies, “Sunacrip is promoting a remittance exchange platform using bitcoin…I believe that its main objective is the collection of taxes in cryptocurrency, for that, a law was approved in the ANC (National Assembly Madurista) where what stands out is the collection of taxes”
    • VEF’s massive hyperinflation recently reached an rate of 10,000,000%
  21. CoinDesk: In First, SEC Clears Blockchain Gaming Startup to Sell Ethereum Tokens
    • The SEC FinHub’s CLO Jonathan Ingram issued a no-action letter to Pocketful of Quarters (PoQ), a gaming startup looking to issue an ERC-20 stablecoin, “Based on the facts presented, the Division will not recommend enforcement action to the Commission if, in reliance on your opinion as counsel that the Quarters are not securities, PoQ offers and sells the Quarters without registration under Section 5 of the Securities Act and does not register Quarters as a class of equity securities under Section 12(g) of the Exchange Act”
    • DLX Law’s Lewis Cohen, who worked with PoQ to secure the letter, said, “The thing that’s notable here, this is the first ERC-20 public blockchain token [approved for a sale]”
    • As part of the firm’s compliance requirement with the SEC, PoQ will set the price of the Quarters as the only seller (a smart contract prevents tokens from being sent to unapproved accounts, thereby restricting secondary trading)
    • PoQ raised money through a registered securities sale using an investment token, which will remain separate from the Quarters sale
    • PoQ CEO George Weiksner, who is 12yrs old, said the two-token system ensures that users conduct txs with Quarters, rather than hold them in the hopes of securing a return
    • Weiksner hopes Quarters will improve the gaming experience for players who are tired of spending large sums for different platforms
    • PoQ is working with Apple and Google to sell Quarters tokens in the App and Google Play stores, respectively
    • PoQ is required to ensure that players can’t sell, buy or exchange tokens with each other; rather, only developer or “influencer” accounts will be able to transact with players, “Accounts are born as regular accounts but they’re restricted, so they can’t exchange… The default accounts are restricted and only approved accounts can accept Quarters”
    • Currently only PoQ can approve accounts, and there are no concrete plans to grant other entities the ability to do so
    • Developers and influencers must pass KYC/AML processes before they can get an approved account
    • Link to Republic.co’s deal on Quarters
  22. IRS: IRS has begun sending letters to virtual currency owners advising them to pay back taxes, file amended returns; part of agency’s larger efforts
    • IRS Commissioner Chuck Rettig said the agency has begun sending letters to taxpayers with virtual currency txs that potentially failed to report crypto-related taxes, “Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties…The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations”
    • +10k taxpayers whose names were obtained through “various ongoing IRS compliance efforts” will receive these letters by the end of August; recent reports imply that the ”various ongoing IRS compliance efforts” consist of conducting interviews, open-source searches, social media searches, issuing Grand Jury subpoenas and using e-surveillance to ensure people pay crypto taxes
    • For taxpayers receiving an educational letter, there are three variations: Letter 6173, Letter 6174 or Letter 6174-A, all three versions strive to help taxpayers understand their tax and filing obligations and how to correct past errors
    • Reddit user u/q928hoawfhu stated, “6174: Basically means they know you have crypto … 6174-A: Basically means they think you broke the law and haven’t paid your taxes, and may or may not start enforcement actions on you soon … 6173: Means they are sure you broke the law, and are coming after you now”
    • Forbes contributor and Cross Law Group Lawyer Tyson Cross reported that Letter 6174-A is “probably being sent to most Coinbase customers, not just suspected tax cheats,” and is likely part of a blanket mailing campaign to any individual the IRS knows has a crypto trading account (i.e., a lot of individuals who properly reported their crypto taxes are receiving this letter)
  23. Abra: Upcoming changes for US Abra Users
    • In order to remain compliant with US regulations, crypto investment app Abra is migrating any synthetic assets to a native hosted wallet solution, leaving US users access only to BTC, ETH, LTC and BCH
    • From Aug. 29, US users won’t be able to hold QTUM, BTG, EOS, OMG, and SNT, and  must exchange or withdraw any holdings of those assets by 3:50 UTC on that date, or else the assets will automatically be converted to BTC
    • NY-based Abra users can no longer use bank ACH or wire transfers, or AMEX cards for D/W after Aug. 29th
  24. Lolli: Lolli Partners with Safeway Grocery Stores
    • Lolli partnered with Albertsons Companies’ subsidiary, Safeway, to allow shoppers to receive 3.5% BTC back when purchasing groceries online at any of Safeway’s 894 locations across 17 states (mainly concentrated in the West coast)
    • Lolli CEO and Co-founder Alex Adelman said, “I’m extremely proud to partner with Safeway, one of the most well-recognized food retailers in the United States. Americans are already shopping for groceries at least once a week, why not earn some bitcoin off those frequent purchases? I’m excited to now offer Safeway, a top food retailer, as another option for our users to earn bitcoin. Hopefully this will give people to ability to get involved in holding and owning bitcoin — perhaps for the first time”
  25. Cointelegraph: Croatian Post Launches Pilot Program for Crypto-to-Fiat Exchange
    • The Croatian Post partnered with Electrocoin to pilot a crypto-fiat exchange that will enable crypto holders to convert BTC, ETH,  XLM, XRP and EOS to fiat at one of the Croatian Post’s local offices in the city of Zadar
    • The exchange pilot has been available at three post offices since July 15th to gauge market interest in the service, with the ultimate aim of spreading the service to major cities and tourist centers throughout Croatia
  26. Cointelegraph: 83% of US Investors Would Dip Their Toes Into Bitcoin
    • According to Grayscale’s 2019 Investor Study, 83% of US investors would consider a preliminary investment in BTC 
    • BTC investors’ political views, income levels and professions bear a close resemblance to the profiles of a broader pool of surveyed investors (i.e., the “average” investor)
    • The average BTC investor is 42yrs old – versus 45yrs old for all investors
    • In-house research indicates that between Sept. 2013 and June 2019, “adding just 5% in Bitcoin to a simulated Global 60/40 portfolio more than doubled cumulative returns from 41.9% to 90.9%”
    • While 36% of investors would consider an investment in BTC of any allocation, 83% out of the 1,100 respondents were strongly motivated by the prospect of dipping their toes into crypto with a small investment in BTC
    • 79% of respondents were bullish on BTC’s growth potential
    • Among BTC investors, interest in physical gold was markedly higher than for the average investor (e.g., 69% of BTC investors see gold as a good investment vs. 55% of all investors, with 65% saying they “definitely” or “probably” would invest in gold vs. 51% of the general pool)
    • 75% of all investors and 68% of those interested in BTC saw digital crime as their foremost fear about BTC
    • 65% of all investors and 53% of those interested in BTC voiced concerns about patchy regulation of the new asset class
    • 89% of respondents said that better educational resources would increase the likelihood of their investing in BTC
  27. Cryptoslate: BitTorrent founder accuses Justin Sun of failed payment in TRON Foundation’s $140 million acquisition
    •  BitTorrent founder Bram Cohen accused Justin Sun of not making final payment on the TRON Foundation’s $140M acquisition of BitTorrent, allegedly the escrow agency hasn’t signed off on the transaction
    • The TRON Foundation’s Head of BD Roy Liu responded to Cohen saying that money in escrow is “not considered Justin’s cash” and that Sun had already signed the release agreement; Cohen replied, “Are you claiming you aren’t trying to get any of the cash back? And do you have an explanation for not signing off on [the deal] two months ago when it was scheduled to happen?”


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