FinCEN info on cross-border crypto 👁 / billions still frozen 😳 / personal essay 📝

FinCEN proposes lowering the Travel Rule threshold from $3,000 to $250...

Inside.com Part of   Network October 26, 2020

Market Watch Bitcoin $13,085 7 day: +14.6% Ethereum $413 7 day: +12% All crypto $392b 7 day: +6.8% Bitcoin dominance 61.5% 7 day: +2.2% Prices as of 12:15 p.m. EDT

The U.S. Federal Reserve and the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) have proposed lowering the Travel Rule threshold from $3,000 to $250. The Travel Rule currently requires all financial institutions to transmit the following information alongside any international money transfer with a value exceeding USD$3,000: Name, account, and address of the transmittor, Identity of the transmittor's financial institution, Amount and date of the transmittal, Identity of the recipient's financial institution. Far-reaching implications: According to Chainalysis, 74% of exchange-to-exchange bitcoin transfers were cross-border, and users send a staggering 88% of U.S. bitcoin ATM purchases offshore. On Friday, the Fed and FinCEN simultaneously unveiled the proposal that would lower the Travel Rule's reporting threshold to $250. It would continue to require financial institutions, including banks and cryptocurrency exchanges, to collect, store, and transmit information regarding international payments. The proposed rule change expressly identifies cryptocurrency transfers as subject to Travel Rule requirements. The document acknowledges that, although some cryptocurrencies can technically be transferred across U.S. borders without the involvement of financial institutions, the vast majority of users rely on hosted wallets, exchanges, and banking institutions to assist their transfers. The proposal is FinCEN's most stern warning to cryptocurrency companies that transmit tokens across U.S. borders, insisting that Anti-Money Laundering (AML) rules apply to both fiat and cryptocurrencies. This story continues in part 2, below. FinCEN Currency Transaction Report Form 104 U.S. Federal Reserve

25 U.S.-based cryptocurrency exchanges have responded to the new Travel Rule. The response to Friday's proposed rule change was immediate from Coinbase, Gemini, Kraken, Bittrex, BitGo, Circle, and others. U.S. exchanges published a whitepaper outlining a proposal for complying with the law. More: Friday's proposal came from the so-called United States Travel Rule Working Group and relied heavily on exchange-to-exchange secure messaging platforms like CipherTrace's Travel Rule Information Sharing Architecture (TRISA). Bitfinex and Tether, defendants in a consolidated $1.4t U.S. class-action lawsuit, understandably opted out of U.S.-based CipherTrace's platform. They prefer Binance's exchange-to-exchange messaging platform, Shyft Network's Veriscope. China's Huobi also prefers Veriscope. The Block Crypto

OKEx still seizing over $3B of austomer assets Over $3b of bitcoin and untold altcoins of customers' assets are still "temporarily" frozen at OKEx. Founder Mingxing "Star" Xu remains in police custody. As noted on Oct. 16, second only to the indictment of BitMEX's co-founders, the fallout at OKEx will likely be the year's second-biggest story. More: OKEx is headquartered in Hong Kong, derives most of its profits from China, but is licensed in Malta, creating some ambiguity regarding the location of the Oct. 16 arrest. Xu possesses private keys for OKEx's cryptocurrency wallets. Mars Finance suggests that police might be detaining Xu regarding an investigation into a "backdoor listing" of OK Group. Police are still detaining Xu. OKEx is publishing updates to allay concerns about its theft of customer assets. OKEx CEO Jay Hao says that Xu's detention "is a personal matter and wouldn't affect the business." Official statements from OKEx are increasingly distancing Xu's activities from OKEx, claiming that police are more interested in the "separate entities" of OK Group and OK Coin. In reality, OK Coin is the predecessor of OKEx's peer-to-peer trading system. OK Coin is also the former employer of Binance's billionaire founder, Changpeng Zhao. Chainalysis notes that while OKEx claims to be located in Malta, it actually serves non-Maltese and non-Italian clients through a Seychelles subsidiary called Aux Cayes. According to a quote from BitMEX's Arthur Hayes, the price to bribe officials in the Seychelles is "a coconut." Coindesk

A personal journal entry Many readers have asked for my personal views about bitcoin. I've decided to draft a brief essay to share with our supportive Inside Cryptocurrency Premium readers. I write this not as a journalist, but personally, in my own words. I am both a bitcoin supporter and skeptic. We are better together as we educate ourselves and think rationally about this important industry. The future of finance is coming, and it is not as rosy as it might appear. Enjoy! This feature is only available to Inside Cryptocurrency Premium readers. Join us with a free ($0!) 14-day trial on all new Inside Premium subscriptions. UNLOCK CONTENT

QUICK HITS Police have arrested the mastermind of a $1b bitcoin scam in Spain. Santiago Fuentes ran Arbistar, a bitcoin-based pyramid scheme affecting more than 32,000 people. Barry Silbert's Digital Currency Group polled its 150 portfolio companies and published its State of Crypto 2020. Russia claims that it will pilot its "digital ruble" CBDC next year. DeFi darling Harvest Finance (FARM) drops 65% in one day. Ethereum developer Virgil Griffith continues denying that he aided North Korea. Learn how to revamp your remote work strategy in this webinar: How to Build a Better Remote Work Experience With Less Software.* *This is a sponsored post.

Written and curated by wide-eyed bitcoin watcher since $1, Aaron Wise. Streaming headline junkie, Associated Press fanboy, eye-strained news terminal watcher, 2017 founder of Cryptocurrency Newsfeed. Temporarily based in Florida while awaiting the construction of cryptopia.  Editor Jonathan Harris is a writer for Inside.com. Previously, he wrote for The Huffington Post, TakePart.com, and the YouTube channel What’s Trending.

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IRS Clarifies Questions About Crypto Holdings

PLUS: DeFi's Harvest Finance hacked, JPMorgan's buoyant bitcoin note, and more.

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October 26, 2020 Sponsored by By Daniel Kuhn If you were forwarded this newsletter and would like to receive it, sign up here.  Top shelf The IRS has clarified some questions around crypto disclosures for the upcoming tax season. A popular DeFi application appears to have been hacked. JPMorgan analysts see "considerable" upsides to bitcoin. Crypto guidance The U.S. Internal Revenue Service has clarified that simply holding cryptocurrencies does not need to be disclosed. A published set of draft instructions for this year’s 1040 tax form spells out that returnees must disclose any crypto sales, exchanges for goods or services, or exchanges for property (including other crypto assets). Respondents must also reveal if they received any cryptocurrency for free, including via airdrops or hard forks. “The draft is likely to stand unless there are ‘unexpected issues’ or new legislation requiring changes, the IRS said in the document,” CoinDesk’s Daniel Palmer reports.  DeFi drain The $1 billion Harvest Finance protocol appears to have been hacked, draining $25 million worth of bitcoin and stablecoins. The anonymous team behind the popular DeFi application tweeted they are “working actively on the issue of mitigating the economic attack,” adding the malicious actor manipulated stablecoin prices on Curve Finance, another DeFi protocol. DeFi analyst Chris Blec earlier claimed Harvest Finance’s administrators held an “admin key that can drain funds” locked in the protocol’s contracts – though it’s unclear if that level of control is related to the recent exploit. The platform’s native token, FARM, tumbled 65%, and the protocol’s TVL dropped to $673 million (as of 5:00 UTC) on the news.  Tether forfeits The U.S. government is pursuing a civil forfeiture claim on more than 300,000 units of the tether (USDT ) cryptocurrency after they were reported stolen in a hack earlier this year, CoinDesk’s Sebastian Sinclair  reports. The funds, co-owned by Shixuan Cai and business partner Lin Jian Chen, were frozen by operator Tether after Cai reported the theft to the Los Angeles Police Department (LAPD) in April, court documents show. “Tether routinely assists law enforcement agents and seeks to further their legitimate objectives,” Tether CTO Paolo Ardoino told CoinDesk. “Tether will always play by the rules, obey the law, and try to be supportive of the wider digital token community.” Speech rights The case against Ethereum developer Virgil Griffith, who is charged by the U.S. government with violating sanctions law and executive orders by allegedly discussing how to bypass economic blockades while speaking at a North Korean cryptocurrency conference, stands without merit, the defense claims. In a motion to dismiss, attorney Brian Klein alleges Griffith only provided information that was already in the public domain and that the President of the United States does not have the authority to prohibit the transmission of information, among other claims. Griffith’s arrest last November is the first sanctions case in a U.S. court involving cryptocurrency. Denial of service PayPal has dropped controversial domain registrar and hosting service Epik as a client, according to Mashable. The payments giant said it had ceased servicing the company over concerns about financial risk, potentially related to Epik’s digital currency, a source “close to the situation" suggested. The crypto, Masterbucks, is used to pay for domain services and can be exchanged for U.S. dollars and allegedly has been touted by Epik as a way to avoid certain taxes. PayPal previously raised money transmission and laundering concerns about the digital currency. For its part, Epik is claiming the blockade shows "anti-conservative bias," as the service has become a lifeline to far-right organizations including Gab and the Proud Boys. SPONSORED BY FLIPSIDE CRYPTO Bitcoin is now part of the Flipside Data Cooperative - a transparency initiative that provides public and shareable views of networks’ on-chain activity in real time. Flipside Crypto transformed Bitcoin’s blockchain data by labeling every stakeholder and transaction that has ever taken place on the network. The labeled data now powers public interactive dashboards, so anyone can watch where whales and other users are sending their BTC. Learn more about Flipside Crypto. Quick bites Open interest on Augur prediction markets passes $1M (The Block) Quantstamp Says Ethereum 2.0 Ready for Launch (Decrypt) ‘It’s This Really Precious Thing.’ Lex Sokolin on DeFi’s Next Chapter, and Frances Coppola on the End of Banks (Opinionated, CoinDesk) Why the PayPal Rally Isn’t What It Seems, and Why That’s OK (Crypto Long & Short, CoinDesk) Carlyle acquires Calastone, one of largest financial users of enterprise blockchain (Ledger Insights) Most Influential 2020: Cast Your Vote Every year, CoinDesk recognizes the “Most Influential” people working to expand cryptocurrency and blockchain’s reach. It’s a list of the 10 outsized individuals who have gone the furthest and done the most. In this most unusual year, we need your help determining who should be named as Most Influential. Check out the list of the top contenders and cast your vote by Oct. 31. At stake Millennial drivers Bitcoin’s narrative as a store of value received some juice this year – seen by the spate of firms adding BTC to their treasury holdings and legacy investors like Paul Tudor Jones support. Though a question remains about how the decentralized money may fit itself into the larger investor scheme.  Part of the issue here is the investor universe is a moving target, especially as more millennials enter the fray. Last week, JPMorgan’s Global Quantitative and Derivatives Strategy published a note, obtained by CoinDesk's Zack Voell, detailing how this changing investor landscape could contribute to “considerable” upsides for bitcoin. Comparing bitcoin to gold, the client memo argued that bitcoin should be seen as a “risk” asset rather than a hedge, based on its positive correlation with the Standard & Poor’s 500 Index. The analysts pointed to millennial investors’ interest in cryptocurrency and the demographic’s increasing role in the larger financial scheme.  CoinDesk’s Voell notes that bitcoin’s market capitalization would have to increase by a factor of 10 before it could match the total private-sector investment in gold. Though “even a modest crowding out of gold as an alternative currency over the longer term would imply doubling or tripling of the bitcoin price from here,” JPMorgan’s note reads. That said, the analysts suggest bitcoin is  “currently overbought for the near term.” Crypto state With the U.S. Election Day next week, much is at stake - including crypto policy over the next four years.   Like it or not, this election will matter for the crypto industry. Our latest limited-run newsletter, The State of Crypto: Election 2020 by regulatory reporter Nikhilesh De, aims to walk you through why. At stake: Will new crypto products be approved or allowed to operate in the U.S.? Will regulators target more overseas exchanges and platforms like BitMEX? Will the U.S. launch a “digital dollar” or some other form of central bank digital currency? These questions will come down to who takes the reins at the various financial regulators and government departments. Over the next several days, we map out the possible outcomes and introduce analysis of the candidates.  Our limited-run newsletter runs Mondays, Wednesdays and Fridays at least until Election Day. Subscribe to The State of Crypto: Election 2020. Market intel Whale parade The number of bitcoin “whales” – clusters of addresses held by a single network participant holding at least 1,000 BTC – is standing at a four-year high. As of Sunday, there are now 1,939 whales, the highest since Sept. 2016, representing a 2.2% increase since last week. CoinDesk’s Omkar Godbole notes the increase is likely tied to the prevailing bullish pressures around bitcoin's price, which jumped 13% last week to register its best single-week performance since April. Who won #CryptoTwitter? ATTENTION: Scammers have been sending fraudulent emails with links to sites disguised to look like coindesk.com. If you are in doubt about a link, type https://www.coindesk.com directly into your browser; do not copy and paste. Remember, if something seems too good to be true, it probably is. Blockchain Bites A newsletter from CoinDesk See previous editions Copyright © 2020 CoinDesk, All rights reserved.  Our mailing address is:  250 Park Avenue South New York, NY, 10003, US  Want to change how you receive these emails? You can update your preferences here.