Telegram U.S. snub: death to initial-coin-offering (ICO) fund raising

Strong enforcement action against prominent player could ripple to blunt ICO enthusiasm

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Russia’s Telegram Messenger, popular among cryptocurrency enthusiasts, has hit a snag raising money.

The company, which focuses on privacy, famously raised around $1.7 billion last year by selling its own cryptocurrency in an initial coin offering (ICO). It plans to deliver the coins to investors end of the month.

But now, in the United States, Telegram must stop. The Securities and Exchange Commission (SEC) has obtained a restraining order, saying the coins are unregistered securities.

ICOs have been hot, with companies raising more than $6 billion in 2017 and $7 billion in the first half of 2018 alone.

Now, with such strong enforcement action against such a prominent player, the effect could ripple to blunt some of the enthusiasm.

Already, an observer says the company’s ability to sell the coins in other jurisdictions could be complicated.

News: mixed progress for mainstream crypto investments

Speaking of the SEC, it also rejects a Bitcoin exchange-traded fund (ETF), a sort of mainstream investment instrument. But a different U.S. regulator has opened the gates for a different mainstream instrument, called “futures,” for Ethereum’s Ether, the second biggest cryptocurrency. These mainstream investments potentially attract more institutional money into the sector.

Along with regulator ire, Facebook Libra cryptocurrency now faces attention from copycats. A cryptocurrency group is looking to copy the open-source code to make their own. Called a “fork,” that move has been popular, with Bitcoin copied more than 70 times. Facebook’s Mark Zuckerberg will testify before U.S. lawmakers on Libra on Oct. 23.

Price: possible fall ahead despite last week’s rise

Bitcoin is facing further losses and risks dropping to $8,000, technical analysis suggests. Bitcoin is at $8,372 (C$11,055) as of noon Sunday, Eastern Time, up almost 4 per cent for the week. Bitcoin had risen to a high of $8,800 during the week, the most expensive it had been for two weeks, before pulling back to current levels.

Canada: widow of Quadriga’s Cotten to surrender assets

The widow of Gerald Cotten, the late founder of Vancouver’s QuadrigaCX, has agreed to transfer assets worth about C$12 million to the trustee overseeing the cryptocurrency exchange’s bankruptcy. The couple had been accused of using Quadriga’s funds personally before Cotten’s death triggered the platform’s collapse. The money will be used to repay users, owed more than C$200 million.

About half of Canadian blockchain companies say “legal and regulatory challenges” are impeding their growth, but their people are also among the highest paid, according to a new report commissioned by an industry lobbying group.

Woe be to Facebook, big-tech cryptocurrency guinea pig

Facebook has been the guinea pig, and the test results say launching a cryptocurrency is not easy

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The transactions giant PayPal has become the first founding backer to leave Facebook's Libra cryptocurrency project. Other backers — Visa, Mastercard, and Stripe — have expressed hesitation.

Who can blame them? All over the world, there has been intense regulatory scrutiny. The U.S. House of Representatives wants Facebook's Zuckerberg to testify on the subject by January.

Facebook has been the guinea pig, and the test results say launching a cryptocurrency is not easy for a big publicly traded company, which can be fined, sanctioned and subject to anti-trust laws and investors whims.

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 last month, who said the company was “watching cryptocurrency.”

Notably, Cook said currency is the domain of governments, a sentiment apparently echoed by the U.S. Federal Reserve, whose senior official called it “inevitable” for central banks to create digital assets.

Even so, the official said the United States should not be the first — another country should be the guinea pig.

Price: possible rise ahead after tumultuous week

Bitcoin could bounce to $8,800-levels over the next few days, but only if it remains above current prices, technical analysis suggests. Bitcoin is at $8,060 (C$10,730) as of noon Sunday, Eastern Time, up about 1 per cent for the week. The tumultuous seven days saw Bitcoin fluctuate almost 10 per cent, falling to as low as $7,700.

Canada: regulator warns against WoToken, Cloud Token

A top regulator for the western province of British Columbia is warning about WoToken and Cloud Token wallets, applications that advertise automated trading to improve returns. They ‘resemble a pyramid scheme” and “appear too good to be true,” an official said.

A Bank of Canada report says Bitcoin’s mining protocol — the process that facilitates transactions and by which new units are generated — is inefficient, although its sheer scale provides a sort of security smaller coins do not have. Bitcoin mining, relatively big in Canada, has been accused of having an excessively large environmental footprint.

News: prominent Bitcoin investment firm rebukes regulator

LedgerX — which said in August it has obtained U.S. approval for Bitcoin-backed futures contracts, but then back-flipped — is accusing the regulator of bias related to the affair. That product would have been the first such mainstream investment instrument backed by actual bitcoins. LedgerX was eventually beaten to the market by the owner of the New York Stock Exchange.

On North Korea, Venezuela, Bitcoin and sanctions

The two countries see cryptocurrency as salvation against sanctions.

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

Venezuela is trying to determine whether it can hold cryptocurrencies in coffers so it can use them in international transactions. And North Korea is in the early stages of developing its own.

Most of the world has restrictions on their business with North Korea and Venezuela. Largely U.S.-led, the sanctions on the two countries are meant to pressure them to address alleged human-rights issues.

That impact on North Korea has been called “crippling.” The state energy company of the oil-rich Venezuela has struggled to get paid by customers because major banks shun it.

Now they see cryptocurrency — which operates without centralized control, effectively immune to sanctions — as salvation. Venezuela’s state oil company already has a stash, indicating some customers may have paid it with digital assets.

It remains to be seen how cryptocurrency will affect geopolitics and vice-versa. But one thing is certain. The effectiveness of sanctions is fading.

Price: big dip maybe ahead after tumultuous week

Bitcoin risks extending its current drop to support near $7,500 over the next days, technical analysis suggests. Bitcoin is at $7,972 (C$10,562) as of noon Sunday, Eastern Time, down some 20 per cent since Monday, set for its biggest weekly loss of 2019. Factors cited include the lacklustre launch of a major mainstream investment backed by Bitcoin and the downturn in U.S. stocks.

Canada: TSX sued over aborted Bitcoin platform

Toronto’s Paycase, a payments provider, is suing the parent of the Toronto Stock Exchange (TSX) for C$500 million over an aborted partnership to form a brokerage for buying and selling cryptocurrency. Paycase is founded by Joseph Weinberg, who also started Shyft, a blockchain-based platform for proving identities on the Internet.

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

Kik, of Canada’s technology hub of Waterloo, Ont., is shutting its messaging app and shrinking to 19 staff to focus on fighting U.S. authorities after being accused of illegally raising millions by selling its own cryptocurrency — an “initial coin offering” (ICO).

News: as regulators probe Libra, Facebook’s Zuckerberg blinks

Facebook’s Mark Zuckerberg is refusing to commit to the planned 2020 launch for the Libra cryptocurrency, saying: “Obviously we want to move forward at some point soon — not have this take many years.” The proposed coin faces severed regulatory scrutiny.

Bitcoin ETF, ‘futures’ — just WTF are they? And why?

What is the significance of all that? Why are all these big finance firms putting so much effort into these mainstream instruments?

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A prominent proposal for a U.S. Bitcoin-based exchange-traded fund (ETF), a mainstream investment vehicle, has been withdrawn, media reported the past week.

That proposal had been backed by in part by the finance giant Chicago Board Options Exchange. Its proponents pulled it after switching gears to offer the ETF to institutional, rather than everyday investors, a move with less red tape.

But the U.S. investment firm Bitwise pushes on with its own ETF proposal.

Meanwhile, Bakkt, owned by the parent of the New York Stock Exchange, is launching on Monday a type of mainstream investment instrument called “futures” that will be the first to be backed by actual Bitcoin.

Then Chicago’s CME Group — the world’s largest platform for futures, which already offers those instruments for Bitcoin, albeit not backed by actual cryptocurrency — said it is expanding its choices. Traders will have another way to bet against the value of their Bitcoin futures through an instrument called “options.”

So, what is the significance of all that? Why are all these big finance firms putting so much effort into these mainstream instruments?

Take gold as a case study. Over the last 20 years, it has risen almost 500 per cent. But short of actually buying bars, it’s been hard to profit off it.

Enter the gold ETF in 2003, backed by the commodity and whose price is perfectly correlated, traded publicly just like a company’s shares.

Suddenly, everyone can easily invest in gold. Prices surged.

It is the same thinking behind all the mainstream instruments for Bitcoin. More money may flow into the space. Perhaps that is why the ETF’s withdrawal could be deemed bad for prices.

Bitcoin sits perilously at $9,990 (C$13,815) as of noon Sunday, Eastern Time, down 3 per cent for the week. Bitcoin could fall further, technical analysis shows.

But then again, Bakkt next week is good for prices, observers say.

Canada: taxman comes for the bankrupt Quadriga

The Canada Revenue Agency has become the fifth government agency to investigate QuadrigaCX, once the country’s largest cryptocurrency exchange, which collapsed after the death of its founder. The taxman is focused on the company itself, not individual users. But the trustee overseeing bankruptcy proceeds notes the cost of responding to requests from various agencies will affect how much money is available to repay users.

Europe wants ‘public cryptocurrency’ — but what is it?

France and Germany are backing the development of what they called a “public cryptocurrency."

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France and Germany said on Friday Facebook’s Libra coin posed risks to the financial sector that could block its authorization in Europe — and backed the development of what they called a “public cryptocurrency.”

The fears of the two major powers that anchor the European Union are justified. Facebook already holds the keys to our speech and our private information and has thoroughly abused that power.

But what exactly is a public cryptocurrency? This is the first time I’m hearing of the term.

A European Central Bank official said the project could allow consumers to use electronic cash, which would be directly deposited at the financial institution. Translation: it is exactly like Libra.         

Rather clearly, Europe does not fear the fact that Libra puts so much power into the hands of one party. It fears the fact that the one party is not it.

Libra is scheduled to launch by the end of 2020.         

Price action: smells like 2015

Bitcoin appears close to mimicking the price movements of 2015, when it began the surge that ended in 2017’s peak of $20,000, technical analysis suggests. Bitcoin is at $10,302 (C$13,694) as of noon Sunday, Eastern Time, almost flat for the week. The world’s first cryptocurrency fell below $10,000 on Wednesday before bouncing back, amid a week of increased regulatory attention on Facebook’s Libra.

News: Binance starts accepting U.S. users next week

Binance, the world’s biggest cryptocurrency exchange, will officially open a U.S. division this week, entering a regulation-heavy country it has long shunned. U.S. citizens were previously banned from Binance.

Canada: miners add capacity; Quadriga to Toronto

Vancouver’s Hut 8 Mining, which used to call itself the world’s biggest publicly listed cryptocurrency-generation company, is adding 4.3 megawatts of electricity to its site in Medicine Hat in western Canada. In the east, Quebec’s Bitfarms has added 13 megawatts in a previously announced plan.

The bankruptcy proceedings of what was once Canada’s biggest cryptocurrency exchange has been moved to Toronto from the east coast. Most creditors are near the city, and four government agencies are probing Quadriga, which collapsed after the death of its founder.

Toronto’s Bunz has removed the ability to accept BTZ from merchants other than coffee and food sellers, saying “it’s expensive to build and maintain.” Bunz, which started as a private Facebook group, calls BTZ a cryptocurrency users can earn when they do chores for each other or barter used items.

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