Abacus Weekly Crypto Recap #2 | Compliant​ ​ICOs,​ ​Faster​ ​Protocols​, ​And​ ​A​ ​Bright​ ​Crypto​ ​Future

CryptoAnalyst is happy to welcome the team at The Abacus for their second weekly crypto recap with us. They’ve got everything you need to know about this past week’s major happenings for crypto and ICOs.

The Abacus Crypto Recap is a weekly update focused on two polar yet symbiotic elements of cryptocurrency markets—adoption and regulation. Let’s bring you up to speed.

Adoption

Bitcoin reached record heights thanks to CME Group’s announcement of a Bitcoin futures market

and blockchain projects from Norway to Japan continuing to propagate across the globe. For

now, excitement around tokenization, blockchains, and cryptocurrency shows no signs of slowing

down, especially with Templum’s bold announcement of an SEC-compliant ICO exchange.

● ICO​ ​Exchanges​ ​Coming​ ​To​ ​A​ ​City​ ​Near​ ​You:​ ​Blockchain startup Templum has raised

$2.7M in a bid to build a fully compliant cryptocurrency trading platform, which will

consider tokens as securities. Similar to the recent announcement from Overstock,

Templum plans to create an alternative trading system compliant with the SEC and FINRA.

As regulated ICO exchanges enter the market, the likelihood that ICOs can become a

mainstream fundraising vehicle continues to increase.

● Bitcoin​ ​Jumps​ ​Towards​ ​The​ ​Future:​ ​The CME Group, which runs a derivatives

marketplace, has announced that regulated Bitcoin futures trading will be made available

within the next two months. This offer affords institutions the ability to trade Bitcoin

futures as a hedge against other investments. CME is the world’s largest options and

futures exchange with over $3B in yearly revenue. CME’s desire to offer Bitcoin futures

demonstrates an increasing mainstream interest in cryptocurrency. It remains to be seen

whether or not American regulators will give BTC futures the green light.

● Russia​ ​Works​ ​With​ ​Megafon​ ​To​ ​Issue​ ​Blockchain​ ​Bonds:​ ​Russia’s National Securities

Depository has issued a $10M bond for Telecom company Megafon using the

Hyperledger Fabric Implementation. Acting as a simple smart contract, buildings bonds on

a blockchain allows for streamlined issuance as it relates to compliance and regulations.

The bond itself was developed by California-based Altoros. Their head of blockchain

practice Oleg Abdrashitov remarked, “…What [banks are] asking now…is not only to

participate in the same commercial paper issue … but they’re asking whether they can

reuse the same nodes and the same network.”

● Japanese​ ​Firm​ ​Goes​ ​All​ ​In​ ​On​ ​Crypto:​ ​Japanese financial conglomerate SBI group is

going on a blockchain tear, announcing eight new cryptocurrency based businesses ranging from

hedge fund management to mining. The group also plans on creating a dominant

cryptocurrency exchange platform. As far as their plans for mining, they claim they wish to

acquire market share via mining in order to “stabilize the market.” Their announcement

follows the explosion of businesses all over the world creating new blockchain-based

products, taking advantage of both the technology and the headline inducing fervor that

comes with it.

● The​ ​“Other​ ​Bitcoin”​ ​Gets​ ​a​ ​Fork:​ ​Bitcoin Cash is already gearing up for its first hard fork,

scheduled for November 13th. The update will address issues with the currency’s difficulty-adjustment algorithm. The fork focuses on key specific areas including adjusting the

difficulty hash rate, targeting a mean block interval of 600 seconds, maintaining stability

for difficulty during periods when hash rates are stable, being able to scale hash rates

appropriately, avoiding oscillations in the feedback relationship between hash rates and

difficulty, and resilience to attacks including timestamp manipulations. Some Bitcoin Cash

nodes and wallets will have to upgrade their software by November 13th in order to

interact with the updated protocol.

● DAG​ ​Protocol​ ​Provides​ ​Blockchain​ ​Evolution:​ ​Influential blockchain researchers Yonatan

Sompolinsky and Dr. Aviv Zohar, authors of the GHOST and SPECTRE protocols, have

announced a new project coming in 2018 that they describe as the next evolution of

blockchain technology. Designed to drastically speed up transactions, the system utilizes

a direct acyclic graph (DAG), described as a method of creating viable and scalable

payment rails utilizing the core concepts of distributed ledgers. According to

Sompolinsky, the structure is “releasing the blockchain from the naivety of the chain

structure.” This new system creates a new block every 10 seconds. These blocks are

then compared via DAG technology, and the most efficient and secure amalgamation of

blocks are interwoven into a thread of new blocks. Miners then analyze these blocks and

vote on which one shows the most valid transaction history. These are not entirely

different from the concept behind Ethereum’s “Uncle Blocks.” Once it is determined that

the most valid transactions have been selected, a record of them only exist for a limited

time before being removed from any means of storage or record. While much remains to

be ironed out, on the issue of funding Sompolinsky somewhat impishly remarked, “The

easy path for us was to do an ICO … We’re going for the more respectable path of an

equity.”

● Utility​ ​Companies​ ​Go​ ​Blockchain:​ ​Italian and German energy companies Enel and E.on

have conducted a trial of a blockchain based energy trading marketplace as part of a

broader “enerchain” initiative supported by 30 European utility companies. E.on’s chief

digital officer stated, “We all believe in the enormous potential that blockchain

technology has for the new energy world.”

● Hashgraph​ ​Giving​ ​Blockchain​ ​Some​ ​Competition:​ ​A team behind a new blockchain

consensus method dubbed Hashgraph claims to be the “future of the internet and

decentralized technology.” They boast that the technology doesn’t require Proof-of-Work

and can handle a transaction throughput 50,000 times that of most blockchains.

● European​ ​Commission​ ​Gives​ ​Blockchain​ ​A​ ​Boost:​ ​The European Commission has

announced that it’s investing €30 billion on new technology initiatives that include

blockchain technology. The program aims to fund investments in the areas of migration,

security, climate, clean energy, and the digital economy, as well as “market creating

breakthroughs.”

● Norwegian​ ​Miners​ ​Launch​ ​Asset​ ​Backed​ ​Token:​ ​Norwegian company Intex Resources

ASA plans to launch an asset-backed ICO that will back the value of the tokens with

physical mineral reserves of iron ore and nickel from the company’s partnership with

Amershaw Metallics Inc. While it remains unclear if this will be of interest to investors, as

the market matures, ICOs are looking for new ways to ensure the viability and utility of

their tokens to assuage concerns over future viability.

Regulation

Vietnam swiftly moved to ban the use of cryptocurrency, Singapore has kept its doors open for

now, and France’s new UNICORN project aims to pave the way for compliant ICOs. It seems that

governments all over the world have recognized the need to address the exponential growth of

cryptocurrency markets but are taking markedly different approaches to regulation.

● Putin​ ​Launches​ ​Russia’s​ ​First​ ​Cryptocurrency​ ​Agencies:​ ​After Putin’s July directive, the

Russian government has chosen Vladivostok to become the country’s inaugural

cryptocurrency hub and the home of Russia’s first cryptocurrency agencies. The first such

agency, currently described as a crypto-advisory entity, will be a type of education center

offering seminars and discussions for those interested in working in the burgeoning

industry. Upon completion of specific seminars, attendees will be awarded cryptocurrency

certificates supposedly “allowing” them to do work in the field. The other agency seems

connected to Interpol and describes itself as a crypto-detective group. Citizens will “learn

to protect themselves from fake cyber-wallets, phishing sites, and hacker attacks.”

● France​ ​Launches​ ​ICO​ ​Initiative:​ ​France’s Autorite des marches financiers (AMF), the

country’s financial regulator, has launched a new ICO initiative with the goal of creating a

regulatory framework for ICOs. The agency is currently debating between updating

existing rules to include ICOs or creating a new structure entirely. They have also created

a new program called “UNICORN,” which acts as a method for ICO organizers in France to

carry out fully compliant fundraising under the purview of the agency.

● Vietnam​ ​Bans​ ​Cryptocurrency:​ ​The State Bank of Vietnam has issued an official ban on

the issuance, supply, and use of all cryptocurrencies set to take effect at the start of 2018.

Those found using cryptocurrencies will be fined anywhere from from 150 to 200 million

đong, approximately $6,600 to $8,800 at the time of writing. While summer rumors indicated

the possible legalization of Bitcoin in Vietnam, it appears attitudes have moved in the

opposite direction.

● Kansas​ ​Puts​ ​The​ ​Kabosh​ ​On​ ​Political​ ​Bitcoin​ ​Donations:​ ​A local politician in the state of

Kansas requested guidance regarding U.S. politicians ability to raise funds via Bitcoin. The

answer from the Kansas GEC’s (Governmental Ethics Commission) was a resounding NO!

Bitcoin was officially deemed “too secretive and untraceable” by the Executive Director of

the GEC. With the current flurry of news tied to Russian election meddling in the United

States election, The GEC’s rational that Bitcoin donations could open the door for

“unidentified” lobbyists certainly resonated with the current political climate.

● South​ ​Korea​ ​Decrees​ ​BTC​ ​A​ ​Commodity:​ ​Governor of the Bank of Korea, Lee Ju-yeol,

has declared that Bitcoin is a commodity rather than a currency in response to a series of

questions regarding Bitcoin’s potential status as a legal currency. He remarked,

“Regulation (for virtual currencies) is appropriate because it is regarded as a commodity,

not at the level of a legal currency.” Adding, “It is not a situation for the Bank of Korea to

take such an action at the present.”

● Michigan​ ​Man​ ​Arrested​ ​For​ ​Illegal​ ​Bitcoin​ ​Sales:​ ​A Michigan man has been charged with

operating an unlicensed money transmitting operation. The man in question was

brokering BTC transactions worth hundreds of thousands of dollars without any proper

licensing. He used the website LocalBitcoins and met would-be clients at a nearby Tim

Horton’s under the alias “salt and pepper.” He was caught after federal agents purchased

$55,000 worth of BTC from him during a sting operation.

● Singapore​ ​Keeps​ ​Its​ ​Cryptocurrency​ ​Doors​ ​Open​ ​(For​ ​Now):​ ​Singapore’s central bank

has stated it will not regulate cryptocurrencies but will continue to watch for risks. Ravi

Menon, managing director of the Monetary Authority of Singapore (MAS) said there is “no

basis for wanting to regulate cryptocurrency,” remarking, “we do want to have anti-money

laundering controls, countering the financing of terrorism controls in place. So

those requirements apply to activity around cryptocurrency.” In the past Singapore has

indicated that it plans to introduce regulations for ICOs.

● U.K.​ ​Claims​ ​Crypto’s​ ​Terror​ ​Link​ ​Is​ ​Low:​ ​The U.K.’s economic and finance ministry has

released a document stating that cryptocurrencies pose a low risk for the funding of

terrorism, with the country’s National Crime Agency adding that digital currency’s use in

money laundering is also relatively low, clarifying that cryptocurrency does seems to be

used for laundering small amounts of money at high volume.

● Lebanon​ ​Slams​ ​Crypto​ ​But​ ​Considers​ ​A​ ​Proprietary​ ​Digital​ ​Currency:​ ​Lebanon’s central

bank is planning on launching it’s own digital currency, which may or may not utilize a

blockchain architecture. Riad Salameh, governor of Lebanon’s central bank “Banque du

Liban,” shared his view that cryptocurrency was ineffective at serving as a national

currency, claiming, “These are not currencies but rather a commodity whose prices rise

and fall without any justification. For this reason, BDL has banned the use of this currency

in the Lebanese market.” He went on to say the country’s digital currency will be available

within the next few years.

● Japan​ ​Issues​ ​ICO​ ​Warning:​ ​Japan has officially issued an ICO warning to investors, with

the country’s Financial Services Agency warning investors to understand the risks and the

content of an ICO project before investing, cautioning investors that, “The price of a token

may decline or become worthless suddenly.” The statement also warned that ICOs may

fall under the existing Payment Services Act and/or the Financial Instruments and

Exchange Act depending on the nature of the token. Japan has long been one of the

most ardent embracers of cryptocurrency and blockchain technology. This news serves

as an indication that ICOs are likely to become regulated in even the most lax countries.

Summary: The​ ​ICO​ ​Party​ ​Still​ ​Has​ ​Room​ ​To​ ​Grow

An increasing amount of countries are directly asserting greater control over the cryptocurrency

and ICO landscape.

Some nations are working to embrace the inevitable proliferation of the

technology, with France’s announcement of their UNICORN protocol aligning with recent news

from countries like Canada that are working to provide frameworks to legally facilitate ICOs.

Other nations have come out with outright bans, but this may be a precautionary measure

preceding the introduction of new regulations, or perhaps acting as a precursor to a government

created digital currency altogether, as we saw with the actions leading up to Russia’s

announcement of the CryptoRuble.

Interestingly, the U.S.’s SEC continues to cautiously address the topic, reinforcing the increasingly

established precedent that ICOs should be treated like securities while working actively on going

after the most malicious of players in the space.

The SEC’s work with platforms like Overstock and Templum suggests a future of formal regulation for ICOs in the largest economy on earth.

While cryptocurrency might inherently circumvent authority, the reality is one in which individual

countries will adopt regulations that best foster and protect their economies and interests.

This will likely result in a future landscape of varying degrees of regulation and international interoperability, much in the way the traditional securities market operates today.

Abacus is a cryptocurrency advisory and independent product development firm specializing in ICO strategy and cryptocurrency investment products. Through our content we aim to provide a voice of reason in the often overzealous world of crypto-markets.

Email hello@theabacus.io to discuss your ICO, chat cryptomarkets or just say hi!

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