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The Weekly Hash – December 23 – 27

Check out all the important happenings of the past week in the world of crypto, brought to you by 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.

  1. SEC: SEC Extends Decision on Wilshire Phoenix’s Bitcoin ETF Proposal to February
  2. Ethereum Foundation: Ethereum Muir Glacier Upgrade Announcement
  3. CCTV: Hebei Police Crack Down on New-Type Power Theft Crime, Seize 6,890 BTC Mining Machines
  4. CNN: The Best Investment of The Decade Turned $1 Into $90,000
  5. The Block: Crypto Trading Spreads Have Plunged 90%, Pushing Desks to Rethink Their Strategies
  6. The Block: 95% of Cryptocurrencies Are Illiquid (Quick Take)
  7. CoinDesk: Chinese Internet Giant Tencent to Launch Digital Currency Research Team
  8. Shanghai Securities News: Mu Changchun—People’s Bank of China’s Digital Currency Does Not Have Hype
  9. Cointelegraph: Crypto YouTubers Allege Platform Is Censoring Their Content
  10. Reuters: China to Expand Blockchain Pilot, Study Forex Reforms for Cryptocurrency—Regulator
  11. CoinDesk: Hedera Hashgraph Asks Investors to Wait Longer for Tokens After Price Crash
  12. NASAA: NASAA Announces Top Investor Threats for 2020
  13. Crowdfund Insider: Rakuten Wallet Announces New Service to Enable Users to Convert Rakuten Super Points to Crypto Assets 
  14. CoinTelegraph: China’s Shenzhen Stock Exchange Launches Index of 50 Blockchain Firms 
  15. Finance Magnets: Paraguay to Audit Crypto Firms, Aims to Bring Regulations in H1 2020
  16. CoinDesk: American Cancer Society Now Accepting Bitcoin Donations Through BitPay
  17. NewsBTC: $25 Million of ETH Hits Exchanges as Traders Wind Down for Holidays
  18. Crypto Briefing: FPGAs Threaten Smallcap Altcoins as Xilinx Enters Crypto Mining
  19. Decrypt: YouTube Admits Bitcoin Ban Was A Mistake
  20. The Block: Beijing Authorities Issue Warning: Firms Must Not Conduct Crypto Business 
  21. CoinDesk: Crypto Firms Can Now Apply For A License in France
  22. CoinTelegraph: Rwanda Blockchain School To Launch In 2020 For Devs, Professionals 
  23. Finance Magnets: Exit Scam? 500 ETH from HEX ICO Wallet Liquidated
    • The SEC postponed its decision on a BTC and U.S. Treasury bond ETF proposal filed by NYSE Arca & Wilshire Phoenix until Feb. 26, 2020; because this is 240 days from the date of which the proposal was published Federal Register (July 1), the regulator can no longer extend the deadline and must approve/deny the proposal come February
    • The firm believes its proposal addresses the SEC’s concerns about market manipulation and surveillance-sharing because the ETF automatically rebalances itself to increase T-bill exposure as BTC volatility increases and decreases T-bill exposure as BTC volatility falls
    • Wilshire Founder and Managing Partner William Herrmann issued a letter to further alleviate these concerns on Dec. 18 that “addresses how the [exchange-traded product] is structurally and fundamentally different from prior bitcoin-related ETP applications […] The comment goes on to show how the two markets that are relevant to the Trust – referred to by the Commission as the ‘regulated markets of significant size’  –  are the CME bitcoin futures market and the spot market composed of the five constituent exchanges [Kraken, Coinbase, itBit, Bitstamp and Gemini] from which pricing for the CME CF BRR is determined”
    • Herrmann added that these exchanges represent the majority of the BTCUSD market and have surveillance-sharing agreements with the CME and CF Benchmarks, the reference rate’s administrator
    • Coverage by CoinDesk
    • Ethereum will undergo the Muir Glacier scheduled upgrade at block 9,200,000, which is expected to occur on Jan. 1, 2020
    • Ethereum node operators and miners should upgrade their node(s) before Dec. 30 to account for the variable block times
    • The upgrade will push back the Ice Age, also known as Difficulty Bomb, which refers to the increasing hashing difficulty in Ethereum’s mining algorithm
    • Ethereum Developer James Hancock said the existing implementation of Ice Age is unnecessarily complex and confusing to communicate to the community, adding that the hard fork would push back the mechanism “as far as is reasonable” to give developers the time to decide whether to update Ice Age so that its behavior becomes predictable or to remove it entirely, “This fork would give us time to address the community to understand their priorities better as far as the intentions of the Ice Age, and give time for proposals for better mechanisms to achieve those goals.”
    • Learn more
    • Police in Tangshan, Hebei, found that the use of BTC mining rigs to steal electricity has become a new type of electricity stealing crime in recent years after inspecting +70,000 households, 3,061 merchants, 1,470 communities, as well as factories, mines, courtyards and villages in the Kaiping District of Tangshan city
    • The police seized 6,890 rigs and 52 high-power transformers since April
    • BTC mining rigs were allegedly operating 24hrs a day, consuming electricity at rates up to 40x those of a regular family
    • BofA Securities reported that BTC is the best performing investment of the decade (2010-2020); $1 invested in BTC in 2010 would now be worth +$90,000
    • $1 in the Greek equity market in 2010 would be worth $0.07 today, while $1 in American stocks would now be valued at ~$3.46, a gain of nearly +250%
    • A 30-year U.S. Treasury that was worth $1 in 2010 is now valued at ~$2.08, while $1 in Turkish bonds would be worth only $0.61  and many bonds no longer generate any income for investors at all
    • 2019 had $17T worth of sovereign debt with a negative yield, while no bonds had negative yields in 2010
    • The Brazilian central bank was the most active with 25 rate cuts and 24 rate hikes since 2010, while the Bank of Japan was the quietest central bank, lowering its rates only once in the past ten years
    • $1 in gold, which was the top commodity of the 2010s, would be $1.34 today, while $1 in oil, the worst commodity of the decade, is now just $0.74
    • The report alleges that investors flock to gold as interests rates fall, adding that the drop in oil prices is partially due to sluggish demand and more supply from more American shale producers, “A key reason why energy stocks were among the biggest dogs in the S&P 500 during the past decade as well”
    • Data provided by Skew shows that BTC’s 1yr realized volatility decreased from 94.6% in 2017 to 71% in 2019
    • Data from trading firm B2C2 shows that crypto trading spreads sharply fell in late 2017 and have been approaching zero since; since Feb. 2018, they’ve collapsed -90%
    • B2C2 Founder Max Boonen said volatility is just one factor weighing down on spreads and that spread compression has more to do with the willingness of crypto traders to take on more risk, “For any amount of risk, liquidity providers are now willing to show smaller spreads. In other words the cost of crypto market risk is lower today. That’s because (1) the market as a whole is more liquid than in 2017 (more participants with different views and horizons) and (2) better technology and automation lower the cost of risk, even if volumes and participation stagnate.”
    • BTC is ostensibly 5x as liquid than ETH and +10x as liquid as all the other cryptos
    • Based on order book depth, 94.6% of all cryptos are currently illiquid and the figure is likely going to increase
    • Chinese internet giant and WeChat owner Tencent is looking to hire someone to head a new crypto research unit, which will exist under the company’s payments wing
    • The team will reportedly support gov’t initiatives in the area and also research how to use digital currencies in its payments platform, how crypto could be used within existing and future regulatory regimes, and other possible business applications
    • According to Quartz and CNBC, the People’s Bank of China (PBOC) views Tencent as a prospective issuer for the digital yuan under development; the new unit will allegedly help develop the gov’ts pilot digital currency plan in Shenzhen
    • Mu Changchun, Digital Currency Research Director of the People’s Bank of China’s (PBoC), said the digital yuan (or RMB) “is not used for speculation. The RMB is used to spend, not for speculation. It does not have the characteristics of bitcoin speculation, nor does it require the currency basket assets to support the value of the currency like stable currency.”
    • Changchun added that the digital yuan is neither a crypto asset (e.g., BTC) nor a stablecoin (e.g., Libra), “At present, the digital currency DCEP of the People’s Bank of China has basically completed the top-level design, standard formulation, function research and development, joint debugging and testing. In the next step, it will follow the principles of stability, security, and controllability, rationally select pilot verification regions, scenarios, and service scopes, and continuously optimize them. And enrich DC / EP functions, and steadily promote the introduction and application of digital forms of fiat currency.”
    • Coverage by CoinDesk
  1. Cointelegraph: Crypto YouTubers Allege Platform Is Censoring Their Content
    • YouTube allegedly censored content from at least four crypto-related channels on Dec. 23, citing “harmful or dangerous content” and “sale of regulated goods”
    • Crypto YouTuber Chris Dunn tweeted, “@YouTube just removed most of my crypto videos citing “harmful or dangerous content” and ‘sale of regulated goods’… it’s been 10 years of making videos, 200k+ subs, and 7M+ views. WTF are you guys doing @TeamYouTube?!”
    • Dunn released a screenshot of the alleged intervention that indicates he was served with a “strike” against at least seven videos, each of which have been designated as “harmful or dangerous content”; these videos’ titles include “50 Crypto Trading & Investing Lessons from the Past 5 Years,” “Is Bitcoin Really Money?” and “The Future of Initial Coin Offerings.”
    • A “strike” prevents the YouTuber from uploading, posting or streaming content for one week, a second strike extends this restriction to two weeks, and a third within any 90-day period results in the permanent removal of the channel
    • Crypto education channel Node Investor wrote, “Merry Christmas to you also @YouTube. Apparently a video I posted two years ago on researching crypto’s is now illegal…Rules are changing.”
    • Node Investor’s video, which was titled “How I Research Cryptocurrencies – My favorite sites and resources,” was removed due to a violation of the platform’s “sale of regulated goods policy”
    • Coverage by Colin Talks Crypto YouTube Channel
    • Lu Lei, Deputy Head of the State Administration of FX (SAFE), China’s FX regulator, said the country will expand the scope of its blockchain cross-border financing pilot platform by strengthening the integration of FinTech and the FX market while maintaining a grip on supervising tech development, “We will gradually expand the scope of the pilot and the application scenarios of blockchain technology in cross-border financing and macro prudential management. At the same time, (the government) will push forward a prospective study on foreign exchange reforms to deal with cryptocurrency and explore the construction of the foreign exchange regulation and technology system under the new situation.”
    • Lu added that the platform is the only one registered by a central state agency at the Cyberspace Administration of China (CAC)
    • According to Global Times, the platform first launched in March and has expanded from 9 provinces and cities to 19 as of November
    • In an effort to stabilize price following a -90% plunge, Hedera Hashgraph, the company behind the blockchain-like Hedera network, is asking investors to patiently wait for their purchased HABR tokens; in exchange for delayed payment, investors will allegedly receive more HABR tokens than outlined in their simple agreement for future tokens (SAFT)
    • Hedera stated that the offer is optional for investors and they anticipate the new agreement to extend token distribution schedules by up to 25 percent, i.e. investors who originally agreed to receive HBAR over a 48-month period will have to wait an additional 12 months before receiving their allocation in full; the number of additional coins to be paid would equate to 10 percent of the company’s annual revenue from treasury sales and tx fees, capped at investors’ original investment amount
    • Hedera’s CEO and co-founder, Mance Harman, stated in a note, “[P]articipating SAFT holders would receive additional allocations of coins, made on an annual basis, the cumulative sum of which, over time, would equal the value of their original principal investment, in exchange for stretching out the release schedule for their remaining coins”
    • In 2018 Hedera raised more than $124 million through three rounds of financing from accredited investors and has already distributed more than 1.4M HABR ($22M) to investors as of September; Hedera has received backing from IBM & Tata Communications and added Boeing to their governing council in August
    • The timeframe for additional allocations remains unclear 
    • According to the North American Securities Administrators Association (NASAA), which was founded in 1919 in Kentucky and is the oldest international investor protection organization, “cryptocurrency-related investments” is among the top five investor threats for 2020; the other threats listed included promissory notes, Ponzi schemes, real estate investments, and social media/Internet-based investment schemes
    • In aggregating the list of investor threats that was released by NASAA’s on Dec. 23rd, the organization surveyed its members, the state and provincial securities regulators throughout the United States, Canada, and Mexico
    • The list of threats is based on investor complaints, ongoing investigations, and current enforcement trends
    • Christopher W. Gerold, NASAA President and Chief of the New Jersey Bureau of Securities, stated, “It is important for investors to understand what they are investing in and who they are investing with. Don’t fall for promises of guaranteed high returns with little to no risk or deals pitched with a false sense of urgency or limited availability”
    • The report warns of investment offers that sound “too good to be true” and “guarantee an investment return”; the report advises that investors always ask if the salesperson and the investment itself are properly licensed/registered
    • Rakuten Wallet, Inc., a consolidated subsidiary of Rakuten Group and operator of a crypto exchange, has launched a new service enabling users to convert their Rakuten Super Points from Rakuten Group’s loyalty points program into crypto assets; once converted, the user’s crypto will be available on their Rakuten Wallet app
    • As for now, users will be able to convert their loyalty points into Bitcoin (BTC), Ethereum (ETH), or Bitcoin Cash (BCH)
    • Rakuten Wallet noted that the launch of the new service aims to reduce the barriers to entry for crypto trading by offering a frictionless way for new users to get involved, as well as novice traders who are interested in crypto
    • Rakuten is a Japanese online retailing company based in Tokyo; the retailer is the largest e-commerce site in Japan by sales and is ranked #328 in global internet engagement according to Alexa.com
    • According to an announcement on December 24th, China’s Shenzhen Stock Exchange (SSE) has launched an index tracking the performance of 50 blockchain firms, “Blockchain 50 Index”; the index ranks the firms based on their trailing six-month average daily market value 
    • Prior to the inception of the index, the SSE performed due diligence to ensure that the firms listed are using blockchain technology, as opposed to capitalizing on the hype and momentum surrounding the tech 
    • SSE is one of two stock exchanges based out of mainland China; the exchange currently has a market cap of $3.12 trillion, making it the fourth largest exchange in Asia and the eighth largest around the globe
    • Link to Blockchain 50 Index
    • Paraguay has announced plans to audit the books of businesses in the crypto industry to better regulate the sector; the government plans to bring regulations to the industry by the first half of 2020
    • The announcement came last week by the Secretary for Preventing Money and Property Laundering (SEPRELAD) and revealed that every virtual asset service providers (VASPs) in Paraguay will need to show their books to the government
    • According to Secretary Minister Christian Villanueva, “Data obtained will be used to measure the degree of adoption, complexity, and size of the virtual asset market in Paraguay, with the purpose of drafting a regulation that adequately regulates them and mitigates the risk of misuse”
    • Regulators intend on making registration mandatory for crypto miners, over-the-counter (OTC) trading desks, exchanges, and other VASPs to ultimately strengthen counter-financing of terrorism (CFT) protocols and anti-money laundering (AML) safeguards
    • As reported by CoinDesk, The American Cancer Society (ACS), a non-profit organization committed to funding cancer research, has now opened its doors to bitcoin donations via BitPay 
    • ACS exec Brant Woodward told CoinDesk, “Cancer affects people from all walks of life, so it’s not surprising that we draw support from a broad cross-section of donors… Our mission is urgent and in order to accomplish it, we need to engage donors where they are” 
    • Woodward went on to say, “The reality is that more and more people are utilizing cryptocurrency… This allows us to be relevant with younger donors and provide frictionless giving opportunities for them and for us to meet them where they are” 
    • BitPay CEO Stephen Pair also commented, “In accepting bitcoin donations, charitable organizations attract new donors without ever having to hold bitcoin… BitPay verifies the funds and accepts the bitcoin on behalf of the organization and settles the transaction in USD or the preferred fiat”
    • As highlighted by Twitter user ViewBase (@viewbasecom), a large number of ETH has flooded into exchanges over the last 24-hours; more than 204,500 ether (ETH), worth roughly $25.6M, has allegedly been deposited between Kraken, Binance, and Huobi
    • Roughly ~90,000 ETH has been deposited into Kraken, while ~26,000 ETH has moved to Binance and ~100,000 ETH has hit Huobi
    • The sudden surge in deposits has market participants on edge over the possibility of swaths of ETH hitting the market and continuing the recent slump in price 
    • Link to Tweet
    • Xilinx, a Fortune 1000 semiconductor company specializing in field-programmable gate arrays (FPGAs), are allegedly entering the crypto mining market, posing a threat to coins with “vulnerable” mining algorithms such as Ravencoin, Nervos, and others
    • Leaked communications from within the firm and images of a “crypto card” device suggests that the $24B semiconductor giant is making moves into crypto mining with FPGAs, a segment that has historically been dominated by Nvidia and AMD graphic processing units (GPUs); in the past, Xilinx mainly served other hardware designers in this market, such as SQRL, an FPGA designer specialized in crypto mining
    • An FPGA allows a miner to configure the hardware to effectively mine different algorithms and potentially even withstand algorithm hard forks designed to avert specialized hardware, similar to those employed by Monero
    • According to SQRL CEO David Stanfill, “In the hardware world outside of crypto mining ASICs, the growing event for the last year and a half has been the gradual replacement of GPU farms with new high-end FPGA based accelerators. Nothing like the small FPGAs that briefly existed in early Bitcoin days… Their [Xilinx] new boards are capable of mining every coin and chain, almost always more power efficiently than GPUs”
    • YouTube told Decrypt that the removal of hundreds of crypto-related videos was “in error” and that accounts and videos have been turned back online
    • A YouTube spokesman said, “With the massive volume of videos on our site, sometimes we make the wrong call. When it’s brought to our attention that a video has been removed mistakenly, we act quickly to reinstate it,” and that there haven’t been any changes to their policies with respect to crypto-related content
    • Although YouTube has claimed that all affected videos have been reinstated, Decrypt has found that prominent crypto YouTubers, including DataDash, Ivan on Tech, Sunny Decree and Boxmining, haven’t seen any changes to their accounts and their videos have yet to be restored
    • A note was issued Friday on behalf of The Beijing Local Financial Supervision and Administration Bureau, the Business Management Department of the People’s Bank of China, the Beijing Banking and Insurance Regulatory Bureau, and the Beijing Securities Regulatory Bureau asking firms to not engage in crypto businesses
    • According to authorities, cryptocurrency trading activities have resurged following the recent promotion of blockchain technology in China and has caused some platforms to have “seriously violated” 2017 rulings
    • In addition to ordering all firms to not promote cryptocurrency projects or platforms, not engage in crypto trading business, and not provide any services related to cryptocurrencies, authorities are urging investors to remain rational to avoid being deceived and to report any businesses in violation of laws & regulations
    • Link to notice
    • On Wednesday the Autorité des marchés financiers (AMF) or Financial Markets Authority released rules and guidelines on applying for a digital asset service provider (DASP) license, as well as how to apply for non-mandatory licenses and inform the regulator about internal cybersecurity practices
    • The rules and guidelines expand upon France’s PACTE law, which was passed in May and is one of the first crypto legislative packages passed in Europe
    • To apply for a DASP, firms are required to send the AMF a two-year business plan, a list of digital assets the firm is going to service, the list of geographies the firm will operate in and the firm’s organizational chart 
    • Licensed DASPs are also required to have the following: 1). professional indemnity insurance or a minimum amount of reserve funds 2). at least one effective senior manager 3). resilient IT systems 4). an internal control system 5). a claims handling procedure 6). an organization enabling it to avoid conflicts of interests and 7). procedures to prevent money laundering and terrorist financing
    • DASP licenses are, however, optional for crypto firms operating in France, as the government only mandates that crypto custodians and any firm dealing with fiat-to-crypto or crypto-to-fiat services register with the AMF for anti-money laundering and anti-terrorist financing reasons; rules for crypto custodians, crypto exchanges, crypto broker-dealers, and crypto custodians have also been released
    • According to Emilien Bernard-Alzias, a partner at law firm Simmons & Simmons in Paris, with the help of the AMF the French government has defined crypto-asset custody service as “mastering” the “means of access” (cryptographic keys) for a third party’s digital assets and keeping track of their positions; the new rules for licensed custodians under its general regulations require multi-validation for customers’ transactions and compensating clients if the custodian cannot restore control of said assets
    • The AMF notes in its guidelines of blockchain security risks and asks crypto firms to provide the regulator with a detailed cybersecurity program that mitigates risks and complies with Europe’s general data protection regulation (GDPR); crypto firms will be required to undergo regular technical audits as a result of providing their digital asset services
    • According to Cointelegraph, ABI Executive Director, Kayode Babarinde, announced that Rwanda’s first blockchain school will have five key courses for local developers, professionals and policymakers come 2020: a blockchain essentials certification course, a blockchain developers’ course, an enterprise blockchain course, blockchain for lawyers and blockchain for impact
    • Babarinde said that the ABI laid the foundation for its work in Rwanda through a pilot phase for the school in Ghana, where the inaugural class for a blockchain essentials certification course was first launched; he also noted, “Every technology company is looking for an enabling environment to serve the continent. This means supportive policies, resource management, and visibility for the market. All these make Rwanda stand out in Africa”
    • Earlier this summer, the president of Uganda officiated the 2019 Africa Blockchain Conference and identified agriculture, manufacturing and processing, services, and ICT sectors as key economic areas that stand to benefit from the use of blockchain tech
    • On December 25th a Reddit user pointed out that ~800 Ether tokens were withdrawn from a wallet used to store the proceeds from the HEX token sale, 770 of which were allegedly sent to “Binance or Bitfinex”
    • Etherscan shows that the outflow of funds began on December 12th with 95 Ether and 500 Ether on Tuesday
    • The post states, “500 eth went out yesterday, and straight into bitfinex a few minutes later… There’s still over 46,000 eth that can be withdrawn and liquidated by whoever controls this address, but Richard Heart, who created the contract says nobody needs to know who that is”
    • Earlier this month HEX token was released on behalf of the project’s founder, Richard Heart; Heart claims investors will receive over 10,000x returns in under 2.5 years and allegedly admitted that the project sounds like a scam, but that HEX is “designed to increase in value faster than anything else in history”
    • Link to Etherscan
    • Link to Reddit post


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