The (U.S.) government is coming for your bitcoins

During the week, government agencies said they are seeking up to $50 million to deal with crypto misdeeds.

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Now that the impeachment of U.S. President Donald Trump is over, the next big thing in American politics is the budget, the allocation of government spending money over the next year.

And this time, they’re coming after Bitcoin and cryptocurrency. During the week, government agencies said they are seeking up to $50 million to deal with crypto misdeeds.

Those bodies include the Internal Revenue Service, the Financial Crimes Enforcement Network, the Commodity Futures Trading Commission, the Federal Bureau of Investigation, the Drug Enforcement Agency and the Office of Foreign Assets Control.

The last, if you remember, was partly responsible for the arrest of the Ethereum researcher Virgil Griffith for North Korea charges.

The White House’s budget summary also focused on a plan to revamp the Secret Service, a move motivated by “cryptocurrencies and the increasing interconnectedness of the international financial marketplace.” The Secret Service was first founded to deal with financial crimes.

Meanwhile, U.S. Treasury Secretary Steven Mnuchin said ominously the government will roll out new cryptocurrency rules, although he did not specify what. 

That came at the foot of an arrest announcement: U.S. federal agents apprehended an Ohio man for “laundering” over $300 million in Bitcoin. He had allegedly run a so-called “mixing” services, which helps users hide the trails of their transactions.

All of that is a trend that is likely to accelerate. Just look at the government contracts of the U.S. firm Chainalysis, which traces Bitcoin transactions. It started with a $9,000 in 2015. Last year, that figure was $5 million.

News: U.S. ‘working hard’ on researching its own cryptocurrency

Speaking of the U.S. government, Federal Reserve chairman Jerome Powell says his organization has been “working hard” on the issue of central-bank digital currencies, although it has “not decided” to actually create one. When asked by legislators about the potential competition from China’s full-blooded effort, Powell said the sort of national cryptocurrency that works for China may not work for the United States. Powell acknowledged Facebook’s proposed Libra cryptocurrency "really lit a fire" under the bank’s work.

Price: descending trend entered, $9,700-levels in sight

Bitcoin has slipped into a descending trend, staring at the $9,700-levels, technical analysis suggests. The currency is at $9,943 (C$13,175) as of 10 a.m. Sunday, Eastern Time, down 1 per cent for the week. Bitcoin dipped below $10,000 on Monday, but quickly recovered, teetering between current levels for most of the week.

What Hut 8 CEO's resignation means for Bitcoin investing

Hut 8 Mining’s chief executive Andrew Kiguel is resigning. The move, for which a reason was not given, comes after a significant milestone for the company.

I write a newsletter on Bitcoin and cryptocurrency every Sunday morning that reaches thousands in North America. Got this from a friend? Sign up below. — E

“Last year was not profitable for many miners

Hut 8 Mining’s chief executive Andrew Kiguel is resigning. The move, for which a reason was not given, comes after a significant milestone for the company, which has sites in Canada’s oil-rich Alberta province.

Vancouver’s Hut 8, which used to call itself the biggest publicly listed cryptocurrency-generation company, has recently been conditionally approved for the Toronto Stock Exchange (TSX). It was previously on an exchange within TSX with lower listing requirements.

What is interesting is that with the news of Kiguel’s departure, Hut 8’s stock fell 40 per cent.

The shares of a Bitcoin mining company, which runs machines to generate the cryptocurrency, are just like that of a gold mining company, going and up down together with that of the underlying commodity.

But while there was a fall in Bitcoin during the period right after the news of Kiguel’s departure, it was no more than 2 per cent. Without the Kiguel news, the stock would likely have not fallen as much as it had.

While buying those shares in a Bitcoin company is a way to profit off the price movements without actually going to the trouble of buying Bitcoin, investors need to keep in mind that it is far from a perfect correlation, as shown by Hut 8’s recent price drop.

Hut 8’s shares, however, did pick up when Bitcoin surged later in the week, the cryptocurrency breaking $9,900 on some exchanges.

Bitcoin is at $10,104 (C$13,413) as of noon Sunday, Eastern Time, up almost 10 per cent for the week.

Bitcoin will likely push toward October highs of $10,350, technical analysis suggests.

News: Coronavirus’ affecting miners; SEC proposes amnesty

Speaking of cryptocurrency mining, that world is expected to be shaken up by China’s Wuhan coronavirus, an analysis by the major publication The Block suggests. Miners are girding for the so-called halving, a reduction of their rewards this year inbuilt in Bitcoin’s protocol, and need new equipment. But due to the outbreak in China, several Chinese mining hardware manufacturers are at a standstill.

The U.S. Securities and Exchange Commission’s senior official Hester Peirce, nicknamed “Crypto Mom” by the blockchain community, has formally proposed a three-year rule-exemption for cryptocurrency projects that raise funds by selling digital tokens; by the end of that, they have to come to compliance. The move comes as major projects come under regulatory spotlight, and as China tries to dominate the blockchain sector.

Would you download a car? Now you can, on the blockchain

The companies CurioInvest and MERJ, in Seychelles, are planning to tokenize 500 collectible cars worth over $200 million.

I write a newsletter on Bitcoin and cryptocurrency every Sunday morning that reaches thousands in North America. Got this from a friend? Sign up below. — E

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I wrote this in a newsletter almost a year ago:

An Estonian trading platform makes big news by announcing what are likely the first “tokenized” stocks, cryptocurrencies backed by shares of companies such as Tesla Inc and Facebook Inc.

Now, the companies CurioInvest and MERJ, in Seychelles, are planning to tokenize 500 collectible cars worth over $200 million.

“You can have a guy in Uganda who’s able to invest in a rare car that’s kept in a vault in Stuttgart,” MERJ said.

Tokenization creates digital coins that are backed by real-world assets. It, through blockchain, allows for flexible fractional ownership with low overhead and on a large scale.

That is already happening for paintings, as is in the case of Masterworks in the United States and the British art investment platform Maecenas.

Owners vote on what to do with the painting and can make money off it through sales or loans.

Price: January surge heralds resurgence in market

Bitcoin's January surge confirms an ascending trend, opening the doors for a continued rally into five figures, technical analysis suggests. The currency is at $9,263 (C$12,261) as of noon Sunday, Eastern Time, up more than 10 per cent for the week. Bitcoin surged amid a general panic in the financial markets, as it reels from the Wuhan virus.

News: malware mining script in Kobe Bryant wallpaper; Griffith pleads not guilty

Microsoft says, “We found a malicious HTML file posing as a Kobe Bryant wallpaper that contains a coin mining script.” Such malware hijack users’ computing power to generate cryptocurrency for the attacker. Wallpapers of other celebrities have also been used in this way. Bryant died during the week in a helicopter crash.

The Ethereum research scientist Virgil Griffith, accused of teaching North Koreans how to use cryptocurrency to evade sanctions at a conference in that country, has officially pleaded not guilty in a New York court. CoinDesk asks lawyers about Griffith’s chances. Speaking of cryptocurrency and sanctions, the Times of London does a deep dive on the matter as a whole, the first time by mainstream media, I believe.

Canada: U.K. court tries to freeze bitcoins after ransomware attack

A High Court in the United Kingdom has ordered an injunction on nearly $1 million in Bitcoin obtained by a ransomware attack on an insurance company based in Canada. The company is not named. It is unclear how successful that effort is. The U.S. firm Chainalysis traced the coins to the big exchange Bitfinex, which says “the focus of the Claimant’s attention is no longer on the Bitfinex platform.”

Another one bites the dust in Facebook’s Libra cryptocurrency consortium

Vodafone’s avoidance of the United States signals the world’s biggest economy might — or at least, there is the perception of that — fall behind in the next big thing.

I write a newsletter on Bitcoin and cryptocurrency every Sunday morning that reaches thousands in North America. Got this from a friend? Sign up below. — E

Facebook’s Libra has had its first defector of 2020. The British telecommunications firm Vodafone has pulled out of the consortium that is to govern the proposed cryptocurrency.

The total membership has dropped to 20, raising further doubt that the digital currency will get off the ground this year as planned.

Vodafone plans to devote resources previously meant for Libra to M-Pesa, its own digital payments platform, already established in African nations, Afghanistan, India, and Romania.

For context, excerpts from past newsletters:

All over the world, there has been intense regulatory scrutiny.

Facebook has been the guinea pig, and the test results say launching a cryptocurrency is not easy for a big publicly traded company.

Other tech companies are learning. Apple’s Tim Cook said that the company is not intending to launch its own cryptocurrency, snuffing notions raised by a senior executive [previously], who said the company was “watching cryptocurrency.”

Vodafone’s avoidance of the United States signals the world’s biggest economy might — or at least, there is the perception of that — fall behind in the next big thing.

The telco’s move also marks the beginning of what will likely be a challenging, no-good year for Facebook.

Price: potential drop ahead after exhaustion of sellers in market

Bitcoin could be in for a drop to $8,000-levels if it breaks significantly below the current price, and needs to go above $8,800 to re-enter its past ascending trend, technical analysis suggests. Bitcoin is at $8,345 (C$10,966) as of noon Sunday, Eastern Time, down almost 2 per cent for the week. The slump happened amid observers’ warnings of decreased market activity during the Chinese New Year season.

News: central banks around the world pursue digital currency

A group of central financial institutions are exploring the idea of a digital currency including the Bank of England and Bank of Canada. Japanese lawmakers are also working on a similar proposal, with one saying the need to do so arises from China’s dogged pursuit of the matter. For context, an excerpt from a past newsletter, in which the same rationale arises for the United States:

The U.S. Federal Reserve is now taking the concept of an official dollar stablecoin cryptocurrency seriously, as China pursues that path, threatening to dominate the sector with a potential first-mover advantage.

China is all about exploiting voids left by the United States, wherever it sees them

Canada: Montreal teen charged in alleged $50-million cryptocurrency scam

An 18-year-old from Montreal is facing four criminal charges connected to an alleged $50-million SIM-swapping scam targeting cryptocurrency holders.

Former regulator ‘crypto dad’ back with plans for digital U.S. dollar

The former regulatory chief has announced plans for the “Digital Dollar Project,” a group to help with the digitization of the U.S. dollar.

I write a newsletter on Bitcoin and cryptocurrency every Sunday morning that reaches thousands in North America. Got this from a friend? Sign up below. — E

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Christopher Giancarlo, affectionately known as “crypto dad” for his accepting comments to the industry while he headed the U.S. Commodity Future Trading Commission, is back.

The former regulatory chief has announced plans for the “Digital Dollar Project,” a group to help with the digitization of the U.S. dollar.

While the project is a private venture, it comes in tandem with governmental interest, as I wrote in previous newsletters:

The U.S. Federal Reserve is now taking the concept of an official dollar stablecoin cryptocurrency seriously, as China pursues that path, threatening to dominate the sector with a potential first-mover advantage.

China is all about exploiting voids left by the United States, wherever it sees them

2020 will be the year of the anti-Bitcoin. Amid increasing regulation, we will likely see more players enter the race to create a digital currency by a country or big company, with a stable price and controllable by a central authority.

Price: Potential drop ahead amid market indecision

Amid an indecisive market, Bitcoin could be in for a drop to $8,200-levels if it breaks significantly below the current price, technical analysis suggests. Bitcoin is at $8,654 (C$11,309) as of noon Sunday, Eastern Time, up 5 per cent in a roaring week, in which the currency almost touched $9,000.

Canada: securities regulators come for exchange platforms

New guidance from the umbrella group for Canadian securities regulators indicates many of the country's crypto exchanges will fall under their purview.

The move came after a slew of exchange platforms in Canada have collapsed, owing millions, the most notable of which was Vancouver’s QuadrigaCX, and has been in the works for some time.

Those platforms have long existed in a legal grey area. When I last spoke to the head of the British Columbia Securities Commission, Peter Brady. he said sometimes, there is little his body can do:

Brady urged investors to be cautious, saying, “Before we can protect investors, we have to have jurisdiction, and that varies case to case.”

News: Bitcoin creator-claimant Wright is wrong — again

The self-proclaimed Bitcoin inventor Craig Wright, the Australian ordered to surrender half his alleged cryptocurrency after a U.S. civil trial, has long said a “bonded courier” is supposed to deliver him this year the digital keys to access billions in digital assets. That has turned out to be hogwash, according to the opposing lawyers in the trial, which is not directly related to Wright’s claim to be Satoshi Nakamoto. What the courier delivered is only a list of public addresses, the lawyers said, casting further doubt on Wright’s claim.

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