This week in the news — 26 October 2018
Coinbase, Circle and the new USDT stablecoin; Japan allows self-regulation for exchanges; and some crypto companies in trouble with US and Indian regulators
Here are some stories you might find interesting — and the links to find out more about them.
Coinbase and Circle release the USDC Stablecoin
Source: Invest In Blockchain, BraveNewCoin, Circle Internet Financial Inc, Coinbase, Fortune
Date: 24 October 2018
A partnership of giants
The crypto exchange Coinbase has joined forces with Circle, a global crypto finance company, to create a new stablecoin — the USD Coin (USDC). This coin is said to be fully collateralized by US dollars.
This is a partnership of giants.
Coinbase was the first cryptocurrency start-up to be valued as a $1 billion “unicorn” by investors. It went on to become the first to bring in $1 billion in annual revenue. It has been very focused on compliance with regulation and, in another first for a crypto exchange, it has recently been awarded a license under New York State Banking Law to operate as an independent Qualified Custodian.
Circle is a cryptocurrency trading platform, now focused on cross-border currency payments and Over the Counter (OTC) trading. It became a $3 billion cryptocurrency “unicorn” earlier this year, following a financing round led by chip-making giant Bitmain. According to Circle’s founder, Jeremy Allaire, Circle is the second largest crypto asset trader in the world, trading over $1 billion per month.
USDC listed on Coinbase platform
According to Allaire, the USDC is part of “a vision of rebuilding the global economic and financial system on top of the blockchain and cryptocurrency infrastructure. A fiat stable coin is a critical part of this infrastructure.”
The purpose of a stablecoin is to provide a safe haven from market volatility, as market participants can quickly cash them out to dollars. On crypto-only exchanges, they provide a quick bridge between dollars and trading. On the Circle website, the ESDC is described as “crypto with a stable side, allowing you to move dollars anywhere in the world in minutes rather than days.”
There are other stablecoins said to be backed by the dollar — most notably the USD Tether. Tether launched on the Bitfinex exchange in 2015, giving the assurance that each Tether coin was backed by a dollar held in reserve in a bank. The initial USDT in circulation was worth $10 million. However, during 2017 and 2018, the USDT in circulation has grown to $3 billion worth. There is growing market scrutiny, rumors and suspicions about whether there is sufficient backing for these coins.
Coinbase announced in September 2018 that it intended to increase the number of assets listed on its platform. To that date, Coinbase had traded only with BTC, ETH, Bitcoin Cash (BCH), Litecoin and Ethereum Classic. Ox (ZRX) was added during October, and now the new USDC has been added to the platform. It has a price of $1 and a modest market size of just under $85 million.
Coinbase customers can also buy, sell, send and receive USDC on iOS and Android apps. To start with, only US customers outside of New York can buy and sell. Other customers around the world can send and receive. The Asian market is a key focus.
Future Coinbase-Circle plans
The Coinbase-Circle partnership is represented by the “Center Consortium” which is the support structure for the USDC. The Center aims to provide technological solutions for the mainstream use of stablecoins.
Other coins are being planned: the EURC (backed by the Euro), JPYC (yen-collateralized) and GBPC (backed by the British pound).
Use cases for USDC
The USDC is an ERC-20 token, on the Ethereum blockchain. This allows for easy transactions between two ERC-20 wallets. Large and small payments can be made without the concern that the value might drop.
It is envisaged that the USDC will be used in DApps, blockchain games and be traded on other exchanges. It is already accepted on Okex, Poloniex (owned by Circle), KuCoin, CoinEx and DigiFinex exchanges.
Regulators in Japan decide on self-regulation for crypto exchanges
Source: Bitcoinist, Bitcoinist, Cointelegraph
Date: 24 October 2018
Good news for the crypto industry and for exchanges in Japan, is that the Financial Services Agency (FSA) has decided that the industry should regulate itself.
The Japan Virtual Currency Exchange Association (JVCEA) is tasked with ensuring that exchanges follow all legal requirements. The JVCEA is a body representing the 16 registered exchanges in Japan. It was formed in April 2018, following a clampdown on exchanges by the FSA.
The FSA clampdown was in response to the hacking of the Coincheck exchange in January, where over $500 million worth of cryptocurrencies was stolen.
In May, the FSA introduced a five-point agenda for crypto exchanges, covering issues such as structure, security, asset management, KYC and anti-money-laundering processes and the restriction of some privacy-oriented coins. Several exchanges, including Japan’s largest exchange, Bitflyer, were given business improvement orders.
It seems that the Japanese regulators have decided that in this fast-moving industry it is better to have experts in the field rather than bureaucrats making the rules.
Some of the tasks to be undertaken by the JVCEA will be to inspect the security of exchanges and to assess the tokens issued in ICOs. Following a hack of the Japanese exchange Zaif in August 2018, the JVCEA defined stricter guidelines for “hot wallets”, including a limit on the number of digital currencies that could be managed online by any exchange.
This decision by the Japanese authorities is part of a number of moves to make Japan crypto-friendly, attracting new businesses and investments into the country.
Who’s in trouble with the regulators?
Source: Bitcoin News
Date: 25 October 2018
It’s best to tell the truth in your marketing blurbs
The US Securities and Exchange Commission has temporarily suspended trading in the securities of American Retail Group (ARGB) because it made several false cryptocurrency claims.
Among these, the company had claimed that its partner Prime Trust was an SEC-qualified custodian and that its cryptocurrency transactions would be “under SEC regulations”. It also claimed that it was conducting an ICO that was “officially registered in accordance with SEC requirements”.
It has now cut ties with its partner and issued a retraction of its claims, including its plans to undertake an ICO. Vassili Oxenuk, the company’s president, said that although his company still aims to “register an offering of a security convertible into a cryptocurrency for sale” with the SEC, this was not likely to happen in the foreseeable future.
The SEC’s investor alert reminded people that,
“The SEC does not endorse or qualify custodians for cryptocurrency, and investors should use vigilance when considering an investment in an initial coin offering.”
It’s clear that the SEC is keeping a stricter eye on crypto companies — and lying to potential investors will not be allowed.
Source: Bitcoin News
Date: 25 October 2018
It’s best to ask for permission first
The Indian crypto exchange Unocoin launched a cryptocurrency ATM in a shopping mall in Bengaluru on the 15 October.
One week later, the Indian police seized the ATM. They also seized laptops, mobile phones, credit cards, debit cards, seals of the Unocoin company, a “cryptocurrency device” and about $2,500.
For a start-up, that’s probably the equivalent of everything they own!
And then the 2 founders were also arrested and will be held in custody for at least 7 days.
All of this for installing the ATM without the necessary permission. According to the police’s Cyber Crime Department,
“The ATM kiosk installed by Unocoin in Bengaluru’s Kempfort Mall has not taken any permission from the state government and is dealing in cryptocurrency outside the remit of the law.”
It seems that Unocoin should have had a license from the RBI (Reserve Bank of India), the SEBI (Securities and Exchange Board of India) and a trade license from the BBMP, a government department responsible for amenities and infrastructure.
Unocoin implies that their troubles are a result of some negative media reports — but it sounds as if they have stepped on the toes of several regulators.
This time the old adage “It’s easier to ask for forgiveness than to ask for permission” did not work!
