DUBAI (BLOOMBERG) – Vertex Ventures, the venture capital arm of Temasek Holdings, said it made an investment in Binance to develop a fiat-to-cryptocurrency exchange in Singapore.

The amount of the investment by Singapore’s state investment firm wasn’t disclosed. Binance, one of the world’s biggest cryptocurrency exchanges, primarily handles trades between digital tokens.

The funding, which is a joint investment between Vertex Ventures China and Vertex Ventures Southeast Asia & India, will also support other fiat-to-crypto gateways and services throughout South-east Asia, according to a statement.

A San Francisco–based company has developed a platform to create an interest-rate market for cryptocurrencies.

Compound, a money-market protocol that runs on the ethereum blockchain—the distributed-ledger technology that underpins all cryptocurrencies—will enable crypto owners to lend out coins they are not using to suitors who have a need for crypto, creating a market for unutilized virtual currency.

“Blockchain assets are novel and exciting, but they lack the most fundamental financial infrastructure—efficient interest rates,” said Robert Leshner, founder and CEO of Compound in a blog post. “Over time, hundreds of trillions of dollars of assets will be tokenized, but the institutions that deploy them will require the usefulness of traditional financial markets—today’s launch is just the first step.”

The Compound protocol matches interest-rate streams rather than people, which means once a coin is supplied it becomes a fungible resource. This allows users to withdraw their coins whenever they like. “You can borrow for six hours, and pay six hours of interest. You can lend for two hours and earn two hours of interest,” Leshner said.

The prevailing interest rate paid by borrowers to suppliers is determined by an algorithm based on demand. However, the company said it would initially set the interest rate before market forces take over but expects lenders to earn an annualized rate in the vicinity of 5% and 10%.

The interest accrued is tied to the price of the asset at the time it is sent to the Compound platform, and any change in the underlying value of deposited assets is the risk of the lender, the party that still owns the asset.

Interest is paid “in-kind,” meaning it is paid in the currency that is being lent and/or borrowed.

The protocol will initially support four cryptocurrencies: Ether, ETHUSD, -0.13%which has a market value of $21.9 billion, 0x ($354.7 million), Basic Attention Token ($163.6 million) and Augur ($143.3 million), according to data from CoinMarketCap. Once the protocol is operating, the company will add a stablecoin, a coin that is pegged to an underlying fiat currency, the U.S. dollar.

Leshner said he expects those who contribute, or lend, assets will likely be a mix of individuals and semiprofessional investors who see every incremental return on their cryptocurrency as meaningful. Whereas borrowers will typically be your sophisticated institutional investors who wish to take advantage of increased leverage or the ability to bet against, or short, the asset. “Whether it’s a stock or a cryptocurrency, you have to borrow it first before shorting it,” said Leshner.

To alleviate any default risk, Compound requires each account to have a balance that covers the outstanding borrowed amount in the cryptocurrency they are lending or borrowing.

Yet, like many facets of the digital currency market, there are risks with the protocol that Leshner described as “existential” risks, which include the cessation of a coin, the coin moving off the ethereum blockchain or a potential fork. A fork is where an upgrade is made to the software and users can’t agree on the new protocol so the coin is split, or forked into two separate assets, such as the case in 2017 when bitcoin BTCUSD, -0.30% forked and created Bitcoin Cash.

In the case of a fork, there would be duplicate ownership of everything on both chains, “your private key would be able to conduct transactions on both chains, and the state would be identical at the fork-block, and then begin to diverge,” the company said.

The company received $8.2 million in seed funding from Andreessen Horowitz, Polychain Capital, and Bain Capital Ventures.

*This post is credited to MarketWatch

North Korea is “increasingly” using cryptocurrencies to evade sanctions imposed by the U.S., according to two Washington-based experts cited by news site Asia Times on September 24.

Lourdes Miranda and Ross Delston sent a joint response to an Asia Times’ inquiry regarding the use of crypto by the government of North Korea (DPRK). Miranda is an independent financial analyst and a financial crimes investigator, and Delston is an independent attorney and expert witness in money laundering cases.

Both experts have claimed that the country is successfully trading existing cryptocurrencies, and is attempting to create one of its own, despite current restrictions imposed on fiat assets:

“International criminals everywhere prefer crypto-currencies and the DPRK is no exception. Crypto-currencies have the added advantage to the DPRK of giving them more ways to circumvent U.S. sanctions. They can do so by using multiple international exchangers, mixing and shifting services — mirroring the money laundering cycle.”

Miranda and Delston further explain the scheme that they allege is in use by North Korean authorities.

Initially, the government hires people who have convenient personal identifiable information (PII) to open a crypto wallet that can be used to trade cryptocurrencies. Then local miners transfer crypto into “multiple” European wallets, where they are mixed and shifted in order to confuse anti-money laundering and know-your-customer (AML/KYC) systems.

The process ends with North Korean nominees buying bitcoins, which are later converted into other popular cryptocurrencies, such as Ethereum or Litecoin, to break the “linear pattern of transactions.”

As the crypto asset’s point of origin is concealed, the North Korean government then has a chance to exchange “laundered” coins to fiat, thus receiving dollars without any sanctions attached, the experts concluded.

Miranda and Delston did not specify the approximate volume of the operations they described, nor did they reveal the source of their information.

As Cointelegraph reported in August, an earlier report by a South Korean bank revealed that North Korea had attempted to mine Bitcoin between May and July 2017. However, the test was then reported as unsuccessful. The report also contained data on attempts to create a North Korean crypto exchange.

Countries pressed by U.S. economic sanctions are often reported as experimenting with crypto. For instance, Venezuela launched its controversial “oil-backed” Petro coin, which some experts claim barely exists.

Iran is reportedly preparing to create its own national cryptocurrency, which is expected to facilitate international transactions for the country sanctioned by the U.S. for launching a national nuclear program, among other things.

*This post is credited to CoinTelegraph.

 

The Bank of Israel, as well as the nation’s Finance Ministry, has been mulling over the idea of a state-sponsored cryptocurrency since Bitcoin’s 00 price high at the tail end of 2017.

Finance Ministry officials spoke of a state-sponsored virtual currency that would be rolled out in order to lower the number of cash transactions in the nation, while cracking down on tax evasion and money laundering.

Black market activity in Israel is estimated to comprise about 22% of GDP.

A draft legal framework for a state-sponsored virtual currency has been in the forefront of Israeli legislation since the start of 2018. Additional news about a ‘Crypto-Shekel’ has been light this year.

On the other hand, some think the discussion about a state-backed digital currency might start heating up. This is especially so since cryptocurrency ha become more and more mainstream across many facets of Israeli culture.

Crypto Is Cool In Israel

Cryptocurrency and blockchain have become all the rage in Israel thanks to its high number of patents, as well as its cutting-edge technological industry. The nation was recently ranked as the 10th most innovative across the globe.

As a result, some think a crypto-based solution to tax evasion and money laundering might not come from a state-sponsored virtual currency, but rather from the private sector.

Some of the nation’s top institutional banks, along with the government, have dug more of a foothold in the digital currency world in recent memory. The Bank of Hapoalim has teamed up with Microsoft Azure to use blockchain for asset digitization.

In February, the nation’s Supreme Court said Bank Leumi was not allowed to close customer accounts, but only due to cryptocurrency transactions. This ruling opened up the virtual currency market in Israel to other entities who were interested in crypto.

State-backed cryptocurrencies have become more and more popular for a variety of reasons, with Russia and Venezuela taking the lead so far.

In October 2017, Russia reported their intentions of releasing the ‘CryptoRuble’ in order to maintain a presence in the digital economy and start reaping financial rewards.

Venezuelan leadership has turned to the Petro to try and ease the ailing Venezuelan bolivar. Many see the virtual currency as simply a tool used to circumvent international sanctions.

A Strong Future For Virtual Currency?

Despite a growing cryptocurrency industry in Israel, some point to a few factors that could hinder long-term adoption.

Right now, virtual currency is subject to a 46% tax rate on profits for corporations, and a 25% tax rate for individuals. Some believe these high rates might hinder the market going forward.

Additionally, Israeli tax authorities struck a deal with the local Bits of Gold exchange in July to hand over information about larger deposits to help fight against cases of tax evasion and money laundering. But some see the agreement as a step by officials to reign in virtual currency trading.

*This post is credited to InsideBitcoins

4 reasons cryptocurrency is likely to be ‘the future of money’

Tuesday’s SEC decision to postpone a ruling on whether to approve the SolidX Bitcoin Shares ETF for trading on The Chicago Board Options Exchange is a good sign.

Given previous SEC statements, the postponement appears to suggest that the U.S. regulatory agency wants to issue a well-thought-out approval ruling that protects cryptocurrency investors and nurtures innovators. I agree with the CBOE that “investors are better served by products traded on a regulated securities market and protected by robust securities laws.” And I would rather see the SEC make a methodical decision to approve a cryptocurrency ETF, with thoughtful guidelines than a rash decision to reject one. 

Bitcoin’s Challenges and Promise

Since 2010, when it emerged as the first legitimate cryptocurrency, Bitcoin has been declared “dead” by pundits over 300 times. Critics have cited the cryptocurrency’s hair-raising price volatility, its scalability challenges to handle a large volume of transactions as a payment method, or the improbability of a central bank ceding monetary control to a piece of pre-set software code.

The adoption of Bitcoin as an alternative to transacting by credit card or other payment methods is rising. After its release as open-source software in 2009, Bitcoin alone has facilitated over 300 million digital transactions, while hundreds of other cryptocurrencies have emerged, promising to disrupt a host of industries.

Granted, no more than 3.5% of households worldwide have adopted cryptocurrency as a payment method. But as developers and regulators resolve the following key issues, global cryptocurrency adoption will likely grow – both as a consumer payment method, and through business-to-business integration, streamlining a variety of operations in the private and public sectors.

The prospect of more widespread adoption explains why I think cryptocurrencies may continue to outperform other investment assets in the long term and improve how the world does business.

Four Key Reasons Why Cryptocurrency is Here to Stay:

1. An SEC-Approved Bitcoin ETF Can Boost Liquidity, Protect Consumers, and Nurture Innovators

Though the SEC may not reach a final decision until next year on the proposed listing of SolidX Bitcoin Shares ETF, I think the agency will eventually approve what many experts say represents the best proposal for a cryptocurrency ETF. The proposal – which requires a minimum investment of 25 Bitcoins, or USD 165,000 assuming a Bitcoin price of $6,500 – seems to meet the SEC’s criteria on valuation, liquidity, fraud protection/custody, and potential manipulation.

By boosting institutional investment, SEC approval would represent another milestone in the validation of cryptocurrencies. To reiterate, rising adoption could benefit the U.S. financial system and other financial systems worldwide, because cryptocurrency promises to create significant financial savings and societal benefits – by streamlining how the world transacts for goods and services, updates mutual ledgers, executes contracts, and accesses records.

2. Comprehensive U.S. Regulation Can Improve Protection, Innovation, and Investment

Beyond a potential Bitcoin ETF, demand is mounting for a comprehensive regulatory framework that protects consumers while nurturing innovation. Because the dollar remains the leading global fiat currency, institutional investors across the globe are especially watching for what framework of rules and policing U.S. regulators develop.

Although many institutional investors are assessing the risk/reward proposition of cryptocurrency investments, that doesn’t mean they’re ready to invest. Many such endowments, pension funds, and corporate investors are awaiting U.S. regulatory guidance and protections to honor their fiduciary duties. How, if at all, for example, will exchanges be required to implement systems and procedures to prevent hacks and otherwise protect or compensate investors from cyber attacks?

Though there’s mounting pressure on regulators to act, cryptocurrency regulation that both protects consumers and nurtures innovation requires a nuanced set of rules, a sophisticated arsenal of policing tools, sound protocols, and well-trained professionals. Developing such a unique strategy takes time, and may involve some stumbles. But I think U.S. regulators will eventually succeed in developing a comprehensive and balanced regulatory framework for cryptocurrency.

If institutions become more confident that regulations can help them meet their fiduciary duties, even small allocations from reputable endowments, pensions, and corporations could unleash a new wave of investment in cryptocurrencies.

3. Bringing the Technology to Scale

Bitcoin and other cryptocurrencies are still developing the capacity to function at a mass scale, which will require processing tens of thousands of transactions per second. But technology such as Plasma, built on Ethereum, and the Lightning Network, a second layer payment protocol compatible with Bitcoin, are being tested, which could enable cryptocurrencies to execute faster, cheaper payments and settlements than any other payment method.

Though developing applications that bring cryptocurrencies such as Bitcoin and Ethereum to scale may not happen overnight, I think sooner or later; developers will get it right.

Making cryptocurrency scalable would probably unleash an explosion of new applications. That would boost adoption by allowing consumers and businesses to more easily take advantage of cryptocurrency by seamlessly integrating it with debit and credit payment systems – again, to execute transactions, update mutual ledgers, execute contracts, and access records.

Such financial activities would likely happen more quickly, cheaply, and efficiently than ever because there would be no banking intermediary needed to validate the transaction and take a cut of the fees. This could improve the cost and efficiency of commerce – between businesses, between businesses and consumers, between governments and consumers, between nonprofits and consumers, and in every combination thereof. The seeds for this transformation of commerce have been planted, and like the internet before it, can innovate in ways we can’t fully anticipate.

4. Meeting Developing World Needs

At its current technological stage, use of cryptocurrency adoption as a payment method could grow fastest in emerging markets, especially those without a secure, reliable banking infrastructure. Many consumers in such regions have a strong incentive to transact in cryptocurrency – either because their country’s current banking payment system is inefficient and unreliable, and they lack a bank account altogether.

Globally, 1.7 billion adults remain unbanked. Two-thirds of them own a mobile phone that could help them use cryptocurrency to transact and access other blockchain-based financial services.[2]

Data underscores the receptiveness of Developing World consumers to cryptocurrency as a transaction medium. The Asia Pacific region has the highest proportion of global users of cryptocurrency as a transaction medium (38%), followed by Europe (27%), North America (17%), Latin America (14%), and Africa/The Middle East (4%), according to a University of Cambridge estimate.[3]

Although the study’s authors caution that their figures may underestimate North American’s proportion of global cryptocurrency usage, they cite additional data from LocalBitcoin, a P2P exchange platform, suggesting that cryptocurrency transaction volume is particularly growing in developing regions, especially in:

  • Asia (China, India, Malaysia, Thailand)
  • Latin America (Brazil, Chile, Colombia, Mexico, Venezuela),
  • Africa/The Middle East (Kenya, Saudi Arabia, Tanzania, Turkey)
  • Eastern Europe (Russia, Ukraine).[4]

As more applications launch in the developing world to facilitate the use of cryptocurrencies to buy and sell goods and services at lower cost and in expanded markets – and more young people receptive to such new technologies come of age – cryptocurrency adoption could well rise exponentially.

Remember The Internet – Investment Bubbles and Bursts Will Identify The Winners

High volatility is inherent in the investment value of this nascent technology, due to factors including technological setbacks and breakthroughs, the impact of pundits, the uneven pace of adoption, and regulatory uncertainty. Bitcoin, for example, generated a four-year annualized return as of January 31st, 2018 up 393.8%, a one-year 2017 performance up 1,318% – and year-to-date, down 52.1%. Bitcoin has experienced even larger percentage drops in the past, before resuming an upward trajectory.

I believe roughly thirty percent of Bitcoin investors over the past half year are speculators since the cryptocurrency has dropped on the negative news by as much as a third. In my view, Bitcoin and other cryptocurrencies will experience many more bubbles and bursts, in part, fueled by speculators, who buy on greed and sell on fear.

But as the dot-com era underscores, the bursting of an investment bubble may signal both a crash and the dawn of a new era. While irrational investments in internet technology in the 1990’s fueled the dotcom bust, some well-run companies survived and led the next phase of the internet revolution. Similarly, despite periodic price crashes, I believe a small group of cryptocurrencies and other blockchain applications, including Bitcoin, will become integrated into our daily lives, both behind the scenes and in daily commerce.

Although “irrational exuberance” will continue to impact the price of cryptocurrencies, this disruptive technology represents the future not only of money but of how the world will do business.

*This post is credited to Dailyhodl