U.S. Think Tank Contradicts Need For Federal Digital Currency

Conservative United States think tank the Heritage Foundation argues that instead of launching a central bank digital currency (CBDC), the government should ensure that the public can use the currencies they prefer, including private ones.

In a commentary piece published on Feb. 12, the Heritage Foundation notes that Facebook’s Libra global stablecoin project “is just the latest reminder that providing money does not have to be a centralized function of government.” The report answers to the idea that the public sector must ensure that sovereign currencies stay at the centre of each nation’s financial system.

The report argues that the principle of monetary sovereignty that member of the U.S. Federal Reserve’s Board of Governors Lael Brainard spoke about in February should be replaced with the concept of consumer sovereignty.

The Heritage Foundation cites the popular concerns that stablecoins and cryptocurrencies heighten the risk of crime and fraud, and notes that “the government does not need to create its own digital currency to protect people from these problems.”

The report also cites concerns that the Federal Reserve should not compete with the private sector. The central bank allegedly competes with private banks with its real-time payment tool, which Cointelegraph reported is expected to be a threat to private banks. The paper argues that a CBDC would also be a type of competition detrimental to the private sector.

Per the report, direct government control over every person’s account is part of the goal of such efforts. According to the Heritage Foundation, “this level of government control simply is not compatible with economic and political freedom.”

As Cointelegraph reported earlier this month, Brainard also said during the aforementioned talk that the institution is more open to the idea of central bank digital currency than previously. Yesterday, Congressman Bill Foster questioned a Federal Reserve official on U.S CBDC progress and was told that the institution is not yet sure whether deploying such a digital currency is a good idea.

Crypto Ponzi Scheme Lures Unknown Number Of Baseball Players

Two men charged over an alleged crypto trading ponzi scheme lured investors, including professional baseball players, with social media posts boasting about their luxurious lifestyles.

On January 30, the Secret Service arrested the Arizona-based founders of Zima Digital Assets, John Michael Caruso, aged 28, and Zachary Salter, aged 27.

Caruso commonly refers to himself as “Krypto King” in social media posts and claims he’s been a cryptocurrency investor since 2012. He has a criminal history and was last released from prison in late 2017.

Salter is an aspiring R&B singer who releases music under the name “Sweet Talker.”

Despite claiming no taxable income, the pair’s extravagant social media posts about their luxury good purchases helped draw in new investors.

They were charged with conspiracy to commit wire fraud and money laundering.

The complaint alleges that Salter and Caruso defrauded more than 90 investors out of at least $7.5 million since June 2018. That figure includes an unknown number of former pro baseball players and senior citizens. Zima is still actively taking investments so the total amount lost is unknown.

Zima’s website claims the firm “operates various private funds focusing on investments in cutting-edge technologies, including crypto and other blockchain based assets,” and Caruso and Salter were featured as successful crypto investors in Forbes, Entrepreneur, and Cigar Aficionado.
A press release that looks an awful lot like an ordinary Business Insider story referred to Caruso as “the Michael Jordan of algorithmic cryptocurrency trading.”

Forensic accountants believe that none of the money Zima took from its would-be investors was actually invested in cryptocurrency. The pair instead used the money to live it up, spending $350,000 on luxury car rentals and another $610,000 on private jets, a mansion rental (dubbed “the Krypto Castle”), as well as a variety of jewellery and designer clothing.

Caruso had a fleet of luxury cars including a Lamborghini, and the pair lost $830,000 within 134 hours of gambling at Las Vegas casinos.

They frequently posted about their lifestyles on Instagram and Facebook, including a video suggesting Zima had $1 billion in assets under management. They used direct messaging on the platforms to contact potential investors.

Their victims include former Major League Baseball players and their families, along with a 76 year old man who lost $200,000 and an 86 year old who lost $60,000.

The investigation found that $1.9 million of the funds was paid back to investors in the form of “returns.”

“The pattern of investor payments against investor payouts with no investment of funds is consistent with … a Ponzi scheme,” court filings show.

Weekly Overview: Cryptocurrency

Canada Issues Guidelines For Cryptocurrency Exchanges

Canadian authorities have issued new direction to regulate which digital currency trading platforms fall under derivatives law.

The Canadian Securities Administration (CSA) clarified new provisions in the “Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets” published on the 16th of January, 2020.

To know more check out our previous blog.

Canadian Teen Charged For Cryptocurrency Theft

A Montreal resident, age 18 if facing 4 criminal charges connected to a $50 million SIM Swap scam that targeted cryptocurrency holders.

“Eighteen-year-old hacker Samy Bensaci is accused of being part of a crime ring that stole millions of dollars in crypto-currency by gaining unauthorized access to the cell phones of crypto-currency holders in America and Canada.” — Infosecurity Magazine. 17th January, 2020

To know more check out our previous blog.

South Korea Considers Imposing Income Tax on Cryptocurrencies

The Ministry of Economy and Finance of South Korea, is considering levying a 20% tax on the incomes made through cryptocurrency transactions.

According to a news report published by The Korea Times on the 20th of January, 2020, the ministry had reportedly ordered its income office to review cryptocurrency taxation. The Korea Times cited an anonymous official who reportedly said that the ministry has not finalized its plan, but noted that the government may impose a 20% tax on crypto income.

To know more check out our previous blog.

PornHub Adds Tether As A Payment Option

Adult entertainment website Pornhub has added a new cryptocurrency payment option after PayPal had abruptly stopped servicing its models in late 2019.

According to a Jan. 23 blog post, Pornhub now supports Tether (USDT) — a major United States dollar-pegged stablecoin — to allow instant and zero-fee payments via the crypto wallet and browser extension TronLink.

Binance Invests In Taiwanese Startup Numbers

Major cryptocurrency exchange Binance has invested an undisclosed sum in blockchain data monetization startup Numbers.

According to a post published on Binance’s official blog on Jan. 21, Numbers aims to create an open, transparent and traceable data sharing, verification and management system. The firm’s open source application reportedly allows individuals to own and monetize their personal data.

Ether Is The Most Correlated Cryptocurrency To Other Coins

Recent research shows that Ether (ETH) was the cryptocurrency most correlated to the rest of the crypto market in 2019.

In a report published on Jan. 22, the research arm of major cryptocurrency exchange Binance suggests that throughout 2019, ETH had an average correlation coefficient of 0.69.

South Korea Considers Imposing Income Tax on Cryptocurrencies

The Ministry of Economy and Finance of South Korea, is considering levying a 20% tax on the incomes made through cryptocurrency transactions.

According to a news report published by The Korea Times on the 20th of January, 2020, the ministry had reportedly ordered its income office to review cryptocurrency taxation. The Korea Times cited an anonymous official who reportedly said that the ministry has not finalized its plan, but noted that the government may impose a 20% tax on crypto income.

“A government official, who spoke on the condition of anonymity, said the finance ministry has not finalized its plan to tax cryptocurrencies.” stated The Korea Times article.

Some have speculated that the government may categorize gains obtained through cryptocurrency trading as “other income” and not capital gains. The other income category also includes gains made from lectures, lottery purchases and prizes.

A clear scheme for crypto cryptocurrency taxation is much needed in South Korea. This became particularly apparent when, at the end of December, major local cryptocurrency exchange Bithumb announced that it was considering administrative litigation over an $68.9 million tax bill that it believes has no legal basis. More recent reports indicate that the firm decided to follow through and take tax authorities to court.

As an article on Cointelegraph exemplified, South Korea’s cryptocurrency guideline has seen noteworthy progress since Park Yong-jin, a member of the National Policy Committee from the ruling Democratic Party, presented the first-ever taxation policy for crypto in 2017.

In 2019, the National Assembly’s national policy committee approved a bill that would give more legitimacy to digital assets by subjecting them to more scrutiny and government oversight.

Canadian Teen Charged For Cryptocurrency Theft

A Montreal resident, age 18 if facing 4 criminal charges connected to a $50 million SIM Swap scam that targeted cryptocurrency holders.

Among the purported victims were Don and Alex Tapscott, renowned Canadian crypto entrepreneurs and co-authors of the book “Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World.”

“We can confirm that last year a hacker attempted steal crypto assets from our company and its employees,” Don Tapscott said in an email to ‘The Star’. “That attempt was unsuccessful. We cooperated with the police (and) have been impressed with their determination to bring those responsible to justice.”

Bensaci was arrested in Victoria, British Columbia, in November and charged with fraudulently obtaining computer service, committing fraud over $5,000, identity fraud, and illegally accessing computer data. In December, the teen was released on $200,000 bail and ordered to live with his parents in northeast Montreal until his next court hearing.

While staying at his parents’ residence, Bensaci is prohibited from accessing “any computer, tablet, mobile phone, game console, including PS3, PS4, Xbox, Nintendo Switch, or any other device capable of accessing the Internet,” and barred from holding or trading any form of cryptocurrency.

A SIM-swapping attack befalls when the hackers are able to trick the telecom company to transfer the victim’s phone number to the attacker’s SIM card. Though it is possible to do this by imitating the victim with the telecom’s customer service, the companies are overwhelmed by insiders that use their access to facilitate this type of crime. With a SIM-swap, aggressors can evade most authentication and password recovery devices that rely on phone numbers.

Canada Issues Guidelines For Cryptocurrency Exchanges

Canadian authorities have issued new direction to regulate which digital currency trading platforms fall under derivatives law.

The Canadian Securities Administration (CSA) clarified new provisions in the “Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets” published on the 16th of January, 2020.

In general, the agency drew a line between trading platforms that make an immediate delivery of a crypto assets to its users, and those that hold the transaction of crypto assets until the user makes a later request.

Following an analysis of trading techniques on different platforms, the CSA concluded that some of them only provide their users with a contractual right or claim to a crypto asset, and do not immediately transfer it to a user. Such crypto trading platforms are subject to securities legislation, and thus fall under derivatives laws.

The CSA will not apply securities laws to crypto exchanges on which the underlying crypto asset is not a security or derivative, and crypto assets are delivered to the user immediately.

Previously, state and provincial securities regulators in the United States and Canada launched probes into potentially fraudulent crypto investment programs as part of the North American Securities Administrators Association’s (NASAA) “Operation Crypto Sweep.” The initiative resulted in hundreds of investigations of initial coin offerings and crypto-related investment products.

In late December 2019, the NASAA said that cryptocurrency investment is among the top five investor threats for 2020.

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Weekly Overview: Crypto And Blockchain News

PwC Switzerland Partners With Chain Security

Smart contract auditing team ChainSecurity partnered with the Swiss branch of Big Four auditing firm PwC to enhance the services the global auditor provides.

In an email sent to Cointelegraph, a PwC spokesperson explained that no acquisition took place and multiple ChainSecurity teams joined the firm.

According to a press release published by the firm on Jan. 5, PwC hopes that, with ChainSecurity’s team, the firm will become “the world’s leader in smart contract auditing.”

FTX Launched Bitcoin Option Trading

Cryptocurrency derivatives exchange FTX has launched Bitcoin (BTC) options trading on Jan. 11.

FTX CEO Sam Bankman-Fried announced in a tweet on 11th January, that options were listed on the trading platform. Furthermore, later the same day he also claimed that options trading volume on the exchange reached $1 million in about 2 hours.

Student Wins Satoshi Nakamoto Scholarship

Bitcoin SV (BSV)-promoting Bitcoin Association has awarded a PhD student at Cambridge University with its Satoshi Nakamoto Scholarship, designed to support the development of blockchain applications.

Per a Jan. 9 press release, Robin Kohze, a second-year human genomics PhD student at Cambridge University, became the first to receive the scholarship following a series of blockchain competitions within the Bitcoin SV Hackathon last fall. With his project dubbed, Hive, Kohze took second place. The scholarship is set to allow further development of Hive into a fully operational platform.

Block.One Released Major EOS.io Blockchain Software Update

Blockchain software development firm Block.One released EOS.io 2.0, the software underlying the EOS blockchain.

In the release announcement published on Twitter on Jan. 10, Block.One claimed that the update makes the blockchain “faster, simpler, and even more secure.”

The official blog post on new software explains that it includes a purpose-built WebAssembly (WASM) engine on which the EOS smart contracts run. According to its official website, WASM is an instruction format designed for deployment on the web and servers.

This change is expected to improve the performance of smart contract execution, given that it is supposedly up to 16 times faster than the engine used in the previous version.