The Weekly Hash – August 19-23

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. Cointelegraph: $3B Ponzi Scheme Is Now Allegedly Dumping Bitcoin by the Hundreds
    • On Aug. 14th, Primitive Ventures founding partner Dovey Wan called attention to the ongoing mass sell-offs from the Chinese Ponzi scheme, PlusToken
    • Wan outlined that PlusToken was created in mid-2018 and promised high yield investment returns at different rebate percentages to its four tiers of member, and by early 2019, the project claimed to have +10M members
    • Wan attached data on all wallet addresses (i.e., BTC, ETH, and EOS) associated with PlusToken and called on exchanges and OTC desks to blacklist them
    • Chinese police hunted down a core team member two months ago and revealed that investors were scammed of $3B; despite the arrest, the crypto can’t be rolled back, “Many of their BTC addresses are started with P2SH which commonly used for mutil-sig [sic], most likely some ppl who hold the keys are not being caught hence police can’t unlock the wallet. For EOS/ETH wallet can be diff case but so far police was not able to touch any of those”
    • Wan recommended that Peckshield and Chainalysis analyze the flows more closely, noting that PlusToken appears to be moving their funds in small batches of 50-100 BTC into exchanges; Chinese traders claimed that an unknown address has recently been dumping 100 BTC incessantly on Binance, which Wan suspects to be connected to the scheme
    • Twitter account @Whale_Alert posted on Aug. 17th that 22,923 BTC (+$240M), which were likely the proceeds of PlusToken, moved through four txs; the four txs moved 6,000 BTC5,000 BTC7,000 BTC and 4,923 BTC  
  2. NZZAS: A delegation of the US House of Representatives visited Switzerland because of the Facebook currency Libra
    • Over the next few days, a six-member delegation from the US House of Reps FSC will visit Switzerland to meet with Swiss Federal Data Protection and Info Commissioner (FDPIC) Adrian Lobsiger to exchange views about digital currencies, with a focus on Facebook’s Libra coin
    • The delegation is led by the chairwoman of the House FSC, Maxine Waters
  3. The Star: Vitalik Buterin speaks about the future of Ethereum, claims the blockchain is almost full
    • ETH co-founder Vitalik Buterin stated, “Scalability is a big bottleneck because the Ethereum blockchain is almost full. If you’re a bigger organization, the calculus is that if we join, it will not only be more full but we will be competing with everyone for transaction space. It’s already expensive and it will be even five times more expensive because of us. There is pressure keeping people from joining”
    • In order to improve the situation, Buterin said that networks need to evolve away from the idea that every computer is required to verify each and every tx and switch to a model whereby a computer on average verifies only a small portion of the txs on the blockchain
    • Buterin claims that the improved scalability this would provide would bring costs down by a factor of +100, and while security is to some extent sacrificed by such a move, the compromise would be fairly modest
  4. CoinDesk: Silvergate Bank Eyes Crypto-Backed Loans for Institutions
    • According to an updated IPO filing, Silvergate Bank, which serves top crypto firms like Coinbase, Bitstamp, Genesis Trading, Blocktower Capital, Polychain Capital and Xapo, has seen increased demand from the industry and is planning to offer crypto-collateralized fiat loans to institutional clients as a part of the Silvergate Exchange Network (SEN)
    • The prospectus states, “This solution provides greater capital efficiency for institutional investor clients that wish to transact without needing to move liquidity on and off different exchanges. … Offering lines of credit would also improve liquidity within the order book of our exchange clients, enabling additional trading on their platforms, potentially reducing pricing arbitrage across exchanges and improving the stability of digital currencies”
    • Such loans would be funded from Silvergate’s own balance sheet, and if the crypto collateral’s price should fall, the bank can go to one of its exchange clients and sell the assets; the company believes the risk of issuing such loans will be “appropriately compensated, … earning attractive risk adjusted returns”
    • Silvergate is also looking into including stablecoins in its payments infrastructure, although the bank isn’t directly involved with any stablecoin issuer at the moment; however, it already holds USD deposits backing “multiple stablecoins”
  5. DNA India: Second-Largest Indian State Maharashtra to use blockchain in agriculture marketing, vehicle registration
    • The Maharashtra gov’t is preparing a regulatory sandbox for testing blockchain in agriculture marketing, supply chain, registration of vehicles and document management system in a bid to improve the service delivery
    • The Maharashtra IT Directorate will be nodal agency for implementation and the gov’t earmarked 100M INR rupees (~$1.4M) for blockchain adoption from 2019 – 2020; 40M INR ($560k) was approved outright by the implementation committee
    • State IT department principal secretary S.V.R. Srinivas stated, “The state government is adopting a cutting edge technology to help enhance efficiency in the governance. Already the government has completed its first blockchain pilot in the fields of health, supply chain, documents and SSC certificates. A detailed report has been prepared to go in for extensive use of blockchain technology in various government departments. A regulatory sandbox, which will be a common framework for adopting blockchain technology, will be prepared in next five to six months”
    • Containing the capital of Mumbai, the state of Maharashtra is the second-largest state in India and is home to +114M people
  6. Cointelegraph: Bank of America Files Patent for Multi-Tiered Digital Currency Wallet
    • Bank of America (BofA) filed a patent with the USPTO for a digital currency wallet with multiple layers of asset access that would accept different passwords for different amounts of funds requested
    • The technology would comprise a computing platform with a digital wallet interface, and would be configured to operate within a P2P network for blockchain management – which could potentially be public or private
    • As an example of how the wallet could work with top cryptos, BofA said, “As an illustrative example, the user may have logically abstracted 4 BTC and 20 ETH in the first tier of the digital wallet interface. The user may specify a first network function request for the Bitcoin decentralized P2P network involving 3 BTC and an address within the Bitcoin network, and a second network function request for the Ethereum decentralized P2P network involving 10 ETH and an address within the Ethereum network”
    • According to the filing, privkeys held by users are susceptible to theft or mishandling, and privkeys held by third parties are no longer wholly-owned by users; BofA believes that their multi-tiered wallet system would be more secure than current wallet systems
  7. Calcalist: Israeli Regulator to Fast Track 2,000 Fintech License Applications
    • The Israeli Capital Market Authority is setting up a licensing fast track due to the glut of +2,000 fintech and blockchain-businesses currently seeking licenses from the state regulator, and is also reviewing its current standards concerning fintech insurance 
    • The fast-tracking program consists of creating small industry specific Authority teams for reviewing applications
    • The head of the Authority, Dr. Moshe Barkat, said, “Business and technological innovation and the relationship with the industry are the basic principles that guide the Authority in its operations … The Authority is engaged in the licensing and regulation of fintech companies on a regular basis, including digital insurance companies, P2P platforms and credit providers, digital wallets, Blockchain-based fintech ventures and other payment services providers”
    • Link to Coindesk’s report
  8. CoinDesk: Santander to Connect Latin America to Ripple-Powered Remittance Service
    • Santander is building a “payment corridor” to enable its Latin American customers to send money to the U.S. instantly and for free via the bank’s One Pay FX app, which uses xCurrent solution and doesn’t rely on XRP like xRapid
    • Currently, the One Pay FX app enables money transfers only between the U.K. and Spain; however, the bank will launch the new corridor country-by-country in Latin America, but it’s not clear when and which country would begin first
  9. The Block: Kraken OTC 20x’d its volume since 2018
    • In an interview with The Block’s Frank Chaparro, Kraken’s Head of OTC trading Nelson Minier said the OTC desk’s monthly trade volumes have increased 20x since the beginning of 2018
    • Minier noted that “Bitcoin and Ether are the big — the whales of our desk,” additionally estimating that BTC, ETH, BCH, XMR, and USDT were the top five cryptos traded by volume
    • Kraken did ~$85B in volume in 2018, but OTC did “substantially less than that … There were rumors back in the day that you saw more routing on OTC desk than Spot, occasionally that happens but it’s very rare”; however, Minier added that high volumes on exchanges often equate to high OTC volumes
    • The desk also sees more technical trades like GRIN, since the desk can guide clients through the process
    • Minier stated that the desk is staffed by 19 people, “We’re not overly staffed I want to say, but we’re staffed right and what we’re focusing on is more efficiency and getting ourselves out there in a more public way”
  10. A1: Pay with Bitcoin and Co. in the A1 Shop
    • Starting from Aug. 19th, Austrian telecom giant A1 will accept payments in BTC, ETH, XRP, LTC, XLM and DASH for network services in seven selected branches in Austria as part of a pilot project with banking solutions Salamantex, Ingenico and Concardis
    • A1 Payment will also enable A1 customers to pay for services using Chinese payment operators Alipay and WeChatPay later in August
    • Founded in 1881, A1 serves 5.1M of the current 6.2M Austrian mobile phone users
  11. Crypto Kanoon/CoinDCX: Indian Supreme Court Gives Central Bank 2 Weeks to Justify Crypto Ban
    • The Indian Supreme Court Justice Rohinton Fali Nariman ruled that RBI officials hadn’t appropriately responded to concerns from the crypto industry over its actions; the central bank now has merely two weeks to justify its reasons for banning banks from servicing crypto operators, “Now justice Nariman questions RBI why you have not properly responded to the representation. You just said that we are forwarding to Govt. Angrily says this is not an answer”
    • In summary, the “case takes the most unlredictable [sic] turn. Justice Nariman directs that RBI must respond to the representation in the manner appropriate. Offers to defer the case for 2 weeks as part heard, let the answer come on reconsideration of banking ban by RBI. RBI has agreed”
    • Although Nariman stated that the RBI has two weeks to respond, bitcoin.com reports that the next hearing is scheduled for Sept. 25th
    • Link to Cointelegraph’s report
  12. Kraken: BAT and WAVES Trading Starts August 22!
    • BAT and WAVES will be listed on Kraken starting Aug. 22nd, but won’t be immediately available for margin trading or on Kraken Futures
    • The two cryptos will be paired with USD, EUR, BTC, and ETH, with both funding and trading beginning simultaneously at 13:30 UTC (the first trade executions will take a bit longer because sell orders can’t be placed until deposits are credited)
  13. The Block: Tether to issue new stablecoin ‘CNHT’, pegged to offshore Chinese yuan
    • Tether is going to issue a new stablecoin, dubbed “CNHT,” pegged to offshore Chinese yuan (CNH)
    • Bitfinex shareholder Zhao Dong told ChainNews that CNHT will be launched “in the near future,” and that his crypto lending platform RenrenBit will be the first one to invest in the stablecoin
    • CHNT will be the fourth stablecoin to Tether’s basket, in addition to three existing stablecoins pegged to USD, EUR and JPY (JPYT apparently hasn’t launched yet)
  14. Cointelegraph: Cryptocurrencies Used to Buy Illicit Drugs, Says White House
    • The White House issued two advisories to financial institutions and digital payments platforms to warn that fentanyl and other synthetic opioids are being purchased using major cryptos such as BTC, BCH, ETH, and XMR, “[the U.S.] is in the midst of an unparalleled epidemic of addiction and death … An analysis of sensitive financial data indicates that domestic illicit drug manufacturers, dealers, and consumers use online payment platforms or CVC to purchase precursor chemicals or completely synthesized narcotics primarily sourced from China”
    • The advisories added, “Individuals located in the United States search for fentanyl and identify potential websites that may provide the opportunity to purchase illicit drugs online. Foreign representatives will instruct the U.S.-based individual to send payments through CVC, such as bitcoin, bitcoin cash, ethereum, or monero”
    • The advisories noted that “CVC transactions generate a significant variety of information elements that may be extremely useful to law enforcement”
    • Financial institutions are being urged to collect these details in case of any suspicion, including “virtual currency wallet addresses, account information, transaction details (including […] hash), relevant transaction history, available login information (including IP addresses), information obtained from analysis of the customer’s public online profile and communications, mobile device information” 
  15. US Treasury: Treasury Targets Chinese Drug Kingpins Fueling America’s Deadly Opioid Crisis
    • The U.S. Treasury’s OFAC and FinCEN named Xiaobing Yan, Fujing Zheng and Guanghua Zheng as narcotics traffickers under the Foreign Narcotics Kingpin Designation Act, freezing any property they own within the U.S. and listing a number of email aliases, citizen numbers and passport info for the three
    • The agency listed a number of BTC addresses, as well as one LTC address that purportedly belong to the Chinese citizens
    • Fujing Zheng is allegedly a “significant foreign narcotics trafficker” who received support from Guanghua Zheng; Yan was separately designated “a significant narcotics trafficker”
    • In addition to naming the three individuals, OFAC listed Qinsheng Pharmaceutical Technology Co. Ltd. and the Zheng Drug Trafficking Organization
    • The group coordinated Wednesday’s designations with the U.S. Attorney’s Office for the Northern District of Ohio, the U.S. Attorney’s Office for the Southern District of Mississippi, the Dept. of Justice’s Criminal Division, the DEA Cleveland and Gulfport offices and DEA’s Special Operations Division
    • Treasury Under Secretary for Terrorism and Financial Intel Sigal Mandelkar said, “The Chinese kingpins that OFAC designated today run an international drug trafficking operation that manufactures and sells lethal narcotics, directly contributing to the crisis of opioid addiction, overdoses, and death in the United States … [Fujing] Zheng and Yan have shipped hundreds of packages of synthetic opioids to the U.S., targeting customers through online advertising and sales, and using commercial mail carriers to smuggle their drugs into the United States”
  16. Ripple: Ripple Supports Xendpay in Opening New Remittance Markets to Stay Ahead of the Competition
    • Ripple added UK-based remittance firm Xendpay as a new client to its global settlements platform, RippleNet, allowing the firm to enter new markets like the Philippines, Bangladesh, Malaysia, Vietnam, Indonesia, and Thailand
    • Xendpay head of product innovation Bhavin Vaghela RippleNet supports the “smaller currencies” that were previously inaccessible to the remittance firm (e.g., Malaysian ringgit or Bangladeshi taka) as it required Xendpay to form local banking partnerships, “Previously we had to create a whole business case for each partner … RippleNet reduces that complication and friction”
    • Vaghela noted that the majority of Xendpay customers are migrants who send remittances back home to contribute to their families’ housing, utility, medical and education expenses
  17. CoinDesk: SEC Approves Blockchain Tech Startup Securitize to Record Stock Transfers
    • Securitize, a provider of tech for issuing blockchain tokens, registered as a transfer agent with the SEC to allow the firm to act as the official keeper of records about changes of ownership in securities 
    • Securitize co-founder and CEO Carlos Domingo, “We can increase the amount of securities issued on the blockchain and give comfort to people that this is a regulated space … The SEC has also started approving other types of exempted securities like Reg A+ and down the road those people will need transfer agents”
    • The company is offering to record transfers for free, which would normally cost ~$150 per transfer for SEC-registered securities; however, Securitize will still charge for the management of securities and corporate actions, such as dividend and interest payments, shareholder votes & redemptions and share buybacks
  18. CoinDesk: Amazon Cloud Outage Causing Major Issues at Some Crypto Exchanges
    • Several crypto exchanges are reporting disrupted services due to an AWS outage 
    • Binance’s CEO CZ tweeted, “AWS is having an issue, mostly with caching services, affecting some users globally … It’s causing some 500 error messages on APIs and affecting some withdrawal processing”
    • KuCoin is also having problems with its AWS Tokyo-hosted services, “Due to the overheating of part of our chassis in the machine room we deployed in AWS, Tokyo, part of our services might become unavailable”
    • Primitive Ventures Founding partner Dovey Wan tweeted that a number of Asian exchanges are affected and the AWS issues are producing erratic market data, “Many Asian exchanges see price instability (and trades were able to execute, yes you can buy extremely cheap Bitcoin if you had limit orders there)”
    • Wan also tweeted a screenshot of order book data from an unnamed exchange that a customer had posted in the BitMax exchange’s official Telegram channel, suggesting traders have been able to buy 45 BTC for ~$0.30 (in USDT)
    • BitMax has since announced that it’s halting withdrawals, although it’s still not certain the price data is sourced from their platform; other sources suggest the screenshot may reflect data from a different exchange
    • Based on CITEX’s order book, users executed BTC trades for as low as $0.32 backed by high volumes 
    • AWS says it found the root cause and AWS functionality is starting to return to normal
  19. Chainalysis: Chainalysis Launches First Actionable Real-Time Alerts for Suspicious Transactions Across 15 Cryptocurrencies
    • Chainalysis launched a real-time alert feature for its “Chainalysis KYT” solution across 15 tracked cryptoassets, “[The alerts] are designed to help cryptocurrency businesses and financial institutions mitigate exposure to regulatory and reputational risk by helping compliance teams focus on the most urgent activity and enforce compliance policies while better allocating resources”
    • Chainalysis’ VP of Product John Dempsey said customers can customize their alerts and adjust risk parameters that meet their needs, “As lawmakers and regulators focus their attention on the industry, it is more critical than ever that cryptocurrency businesses demonstrate compliance best practices … Every minute counts when managing exposure to sanctioned entities, hacked funds, darknet markets, and other illicit activities, which is why Chainalysis is investing in fast, actionable alerts to help our customers mitigate risk across cryptocurrencies”
  20. The Block: China to levy new tariffs on $75 billion of U.S. imports
    • China plans to impose new retaliatory tariffs on $75B of U.S. imports, ranging from 5-10%, and Beijing will resume a 25% tariff on U.S. cars
    • The new tariffs are expected to take effect at the same time as the tariffs on $300B worth of Chinese products proposed by President Trump, Sept. 1 and Dec. 15
  21. The Block: Bitmain buying 600K more crypto mining chips that could bring $1.2 billion in profit – Report
    • WeChat reported that Bitmain placed an order for 600k mining chips, a portion of which includes the latest 7nm model
    • Based on the hashrate, Bitmain’s total hash power could jump by as much as 50% after six months
    • The new chips are projected to bring as much as $1.2B in profits to Bitmain, which could allegedly put Bitmain’s valuation at $12B
    • The new chips are projected to bring as much as $1.2B in profits to Bitmain, which could allegedly put Bitmain’s valuation at $12B

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