Crypto Fraud Now Exposing Legacy Banks to Compliance Issues, Reports CipherTrace

The nature of cryptocurrency fraud is shifting away from exchange hacks, and toward Ponzi-style frauds, pyramid schemes and exit scams. A massive 533% rise in the value of such crimes means that as misappropriated funds are laundered, the traditional banking system is increasingly exposed to risk under upcoming Financial Action Task Force (FATF) rules. That’s the conclusion reached by CipherTrace, a cryptocurrency intelligence firm, in a report released today.

The Travel Rule requires virtual currency businesses to “obtain, hold and transmit required originator and beneficiary information in order to identify and report suspicious transactions, monitor the availability of information, take freezing actions and prohibit transactions with designated persons and entities.”

The rule will apply to the 37 members of the FATF, including the United States, China, Japan, South Korea, and many European countries. It is slated for implementation in June 2020.

Banks at risk?

Despite a significant 160% year-on-year escalation of losses suffered by cryptocurrency users, exchanges, and investors — from $1.74 billion in 2018 to over $4.5 billion in 2019 — it’s not only the crypto industry that stands to lose as a direct result of increased criminal activity. According to CipherTrace’s research, the typical top 10 U.S. bank unknowingly facilitates approximately $2 billion in illicit cryptocurrency transactions each year. While banks paid a total of over $6.2 billion in Anti-Money Laundering (AML) fines in 2019, that number could increase as the Travel Rule is introduced.

“As crypto-assets become increasingly entangled in traditional financial services, AML and CTF [Counter-Terror Financing] compliance risks are on the rise,” said Stephen Ryan, COO of CipherTrace. “Virtual assets are now pervasive in bank accounts and payment networks, and banks must find ways to deal with the risks. Effectively mitigating cryptocurrency risks requires equipping compliance officers with the best tools and intelligence to gain visibility into this new asset class.” 

CipherTrace CEO David Jevans continued:

“Like them or not, banks have a lot more virtual assets lurking in their accounts and payment networks than most in the industry had previously thought. Banks need new capabilities to ferret out illicit MSBs [Money Service Businesses], terrorist financing, and other major sources of risk.”

Scams on the rise

Although the total value of thefts and hacks decreased by 66% over 2019, losses suffered by direct cryptocurrency industry participants rose to $4.5 billion, driven by the increase in the amount misappropriated through scams.

CipherTrace dubbed 2019 the year of the “Malicious Insider,” explaining that the trend of events such as the disappearance of funds from the QuadrigaCX and IDAX exchanges are count as “insider” jobs.

While the decrease in security hacks is encouraging, the “logarithmic rise” in losses to insider-perpetrated scams means that cryptocurrency industry participants need to continue to exercise extreme caution in their investment research.

Source Cointelegraph

VC Giant Grayscale Investments Reports Record-Breaking Year

Venture capital firm Grayscale Investments banked a stellar 2019 to surpass the $1 billion mark in total investments. 

By the numbers

In a comprehensive eighteen-page report, the firm touted a record Q4 in 2019. It raised $225.5 million into its investment products, lifting the year’s inflow to $607.7 million after back-to-back quarterlies over $225 million, possibly signaling a larger market trend. 

71 percent of the year’s inflow sprung from institutional investors. Managing director Michael Sonnenshein told Cointelegraph: 

“We saw record-breaking investment into Grayscale’s family of products, illustrating continued demand from investors for digital currency access products and with a majority of investment coming from institutions, it’s clear that we’re experiencing institutional adoption.” 

Existing clients amassed 75% of capital raised. 36% of Grayscale clients now use multiple company products. The company saw its client base grow by 24%. 

Grayscale investors love Bitcoin

Grayscale Bitcoin Trust, which Cointelegraph first reported on last year, led 2019’s investment demand with $471.7 total — $193.8 million of it raised in Q4, another historical high for the New York-based firm. 

Signaling a shift among traditional institutions, communications director Marissa Arnold told Cointelegraph, “As the largest digital currency asset manager, we feel that our numbers are indicative of broader market sentiment and institutional flows into digital currency.” 

As younger investors continue finding Bitcoin and other digital currencies safer investments, especially as Bitcoin enjoys a slight surge, this may be the case. 

Projecting the larger crypto market, Arnold added: 

“The asset class is experiencing increased validation from legacy companies like Fidelity and CME, signaling to institutions and the investment community as a whole that crypto as an asset class is here to stay.”

Cointelegraph News

MUFG Bank Denies Reports It is Developing New Digital Currency

MUFG Bank, the largest bank in Japan and the world’s fifth-largest bank, has denied reports that it plans to launch a digital currency in Japan next year.

In a statement on Dec. 4, Mitsubishi UFJ Financial Group Bank (MUFG) said it had not decided whether a recent business partnership would ultimately form a digital currency entity.

MUFG: digital currency claims unofficial

Previously, various local English-language media outlets including Japan Times had reported that MUFG was eyeing a release date in the first half of 2020 for an as-yet-unnamed digital currency.

“These reports are not based on any announcement made by MUFG Bank,” the statement read. MUFG added, “It is true that we have concluded the joint venture agreement for an establishment of a new company. No other decision has been made in this regard at this time.”

Digital currency products flood Japanese market

The offering would reportedly let users make payments via smartphone using QR codes, with the digital currency account linked to a bank account. 

According to Japan Times, which cited “informed sources,” MUFG would hold a minority stake in the company behind the token. 51% would be owned by its partner, human resources services provider Recruit Holdings.

A growing number of banks are attempting to front-run demand for such payments, with schemes such as Mizuho Bank’s J-Coin Pay gaining considerable attention locally.

Such a move would not be MUGF’s first venture into the digital currency sphere. As Cointelegraph reported, last year, the bank unveiled an in-house digital currency project under the name “MUFG Coin.”

In February, meanwhile, a separate partnership with content delivery network Akamai aimed to debut a blockchain payment network, dubbed Global Open Network, in the first half of 2020.

Source Cointelegraph

Markets Crash After Reports That Binance’s Shanghai Office Closed in Crypto Crackdown

Chinese authorities have reportedly raided and shut down the Shanghai offices of leading cryptocurrency exchange Binance. 

Citing unnamed local sources, The Block says that local police have shut down Binance’s offices after raiding the premises. Between 50–100 of the exchange’s employees reportedly worked out of the Shanghai location.

Binance has not responded to Cointelegraph’s requests for comment as of press time. 

Closure follows crackdown 

The purported raid follows a crackdown on cryptocurrency-related businesses and activities in the country. 

Recently, financial authorities in China issued a notice to the public, directing individuals to report businesses engaged in virtual asset trading to the Shanghai headquarters of the People’s Bank of China — the country’s central bank. Activities that must be reported include:

“Virtual currency transactions in the territory; the other is to issue ‘xx coins’ and ‘xx’ in the form of ‘blockchain application scenarios.’  Currency, fundraising or bitcoin, virtual currency such as Ethereum; third, providing services such as publicity, diversion, agency trading, etc. for registered ICO projects, virtual currency trading platforms, etc.” 

Notice from authorities on cryptocurrency-related activities. Source: Chain News

However, Binance told Cointelegraph that the company had not received this notice. Similarly, Beijing-founded Huobi told Cointelegraph that the company was familiar with the notice, but had not received it.

Offices are an outdated concept?

In a move of regulatory arbitrage, Binance opened offices in Malta in 2018 as the island nation ramped up its cryptocurrency-friendly regulatory projects.

Last month, rumors abounded that the exchange was opening offices in the Chinese capital of Beijing, despite the country’s decidedly anti-cryptocurrency stance. 

However, according to the firm’s CEO Changpeng Zhao, offices themselves are an antiquated concept. In a tweet on Nov. 19, Zhao said, “Office and HQ are old concepts like SMS and MMS. Time is moving on…” 

Markets react with major coins seeing red

Cryptocurrency markets have reacted to the news, with most major coins seeing significant losses on the day.

Cryptocurrency market visualization. Source: Coin360

Bitcoin (BTC) is seeing losses over 6% while leading altcoin Ether (ETH) has lost over 8% in the last 24 hours. Altcoins like Litecoin (LTC) and EOS are taking a beating with over 9% losses, while Binance’s own coin, Binance Coin (BNB), is down 10% at press time to trade at $16.58.

Source Cointelegraph

Tunisian Central Bank Denies Reports of an ‘E-Dinar’ Digital Currency

The Central Bank of Tunisia (BCT) has denied reports stating that the bank is developing a central bank digital currency (CBDC). An official announcement from the BCT follows apparently false reports that Tunisia was the first country to start moving its national currency to a blockchain platform and was preparing to launch its “e-dinar.”

Central Bank of Tunisia is focused on the digitization of finance

In the statement, the BCT refuted all claims regarding the development of a digital money solution. The Central bank clarified that it is now exploring various methods of digital payment alternatives, including a possible CBDC, but it has not moved forward with its implementation. The bank further stated:

“The BCT is currently focusing on the digitization of finance, in its digital currency dimension and not that on cryptocurrency. Its services are studying the opportunities and risks inherent in these new technologies, particularly in terms of cyber security and financial stability.”

Regarding the purported partnership with a foreign company to deliver a CBDC, the BCT declared that it does not have such a relationship with any domestic or foreign firm.

Confusion regarding proof-of-concept at the Forex Club of Tunisia

However, the bank admitted that the Forex Club of Tunisia — an event hosted by an “independent association connected to the BCT” — has featured talks regarding CBDCs. At the event, participants were offered to attend a demonstration on the theoretical feasibility of a digital currency initiated by a private startup. 

The startup has “no moral or contractual relationship with the BCT,” the bank emphasized. The BCT concluded that the proof-of-concept at the forum was taken out of context due to a marketing operation where the BCT’s name was improperly used. 

In the statement, the BCT also specified that it is preparing to launch a regulatory sandbox for technological innovations in the banking and financial sector in early 2020.

As previously reported by Cointelegraph, one of the first reports on the BCT’s alleged e-dinar was delivered by Russian news agency Tass on Nov. 7. The report said that the Tunisian dinar would be digitized and issued on the Universa Blockchain, a platform created by a Russian initial coin offering startup.

Source Cointelegraph

Genesis Capital Crypto Lending Firm Reports $870M in New Originations in Q3

The institutional digital asset lending firm Genesis Capital released its Q3 report, which shows a growing demand for cash and stablecoin lending.

On Oct. 30, Genesis Capital, a spin-off of over-the-counter cryptocurrency broker Genesis Global Trading, reported that the crypto lending firm saw a sustained growth in the lending business in the third quarter of 2019, where they added $870 million in new originations, breaking the previous record of $746 million set in Q2 2019.

Cash and stablecoin loans are in demand

The official report noted that at the end of Q3 cash loans showed a significant increase in the portfolio of Genesis Capital, representing 31.2% of its active loan portfolio, up from 23.5% at the end of Q2 and 14.0% at the end of last year. The report reads:

“Our loan portfolio largely sustained its value through increased cash (USD and stablecoin) loan issuance, offset by a decrease in the notional value of crypto loans outstanding.”

Much like the second quarter, the lending company experienced another “strong demand internationally to borrow USD,” mostly through the procurement of stablecoins such as USD Coin (USDC) and Paxos Standard Token (PAX).

Genesis started 2019 at approximately $20 million outstanding cash loans and “after seeing moderate growth to $40 million towards the end of Q2, Q3 saw nearly a 4x increase in cash loans outstanding, reaching a high of $160 million in mid-September.”  

According to the report, Genesis currently sits at $140 million outstanding cash loans — a decrease from the high of $160 million in December — due to the recent spot selloff from $10,000 per Bitcoin (BTC) to $8,000.

Less demand for Bitcoin loans

Genesis also reported that the share of active Bitcoin loans has decreased to 50.2%, coming from 68.1% at the end of Q1. The report states that this is mainly due to the new U.S. dollar issuance in Q3, which took share away from active BTC loans as altcoin demand increased slightly. Altcoin loans on the other hand, have grown in popularity in Q3, with Ether (ETH) having increased to 7.5% from less than 4% the previous quarter. 

Genesis Capital partners with Bitcoin IRA 

In October, Los Angeles-based BitcoinIRA partnered with Genesis Capital to offer investors the opportunity to earn interest on cryptocurrency and cash holdings. BitcoinIRA COO Chris Kline argued that adding interest-earning accounts to the firm’s crypto and cash lending program would help spur decentralized finance forward, claiming:

“Borrowing and lending using cryptocurrencies and cash are providing new and safe opportunities for our clients to maximize the growth of their retirement accounts. Interest earned by a client can offset trading fees or custodial holding fees, essentially creating a free account making these fees a thing of the past.”

Cointelegraph News

Tether Catching Up With BTC and ETH in Payments, Bloomberg Reports

Stablecoin Tether (USDT) is gaining popularity as a payment method, with some analysts seeing it catching up with Bitcoin (BTC) and Ether (ETH).

As Bloomberg reported on Oct. 25, cryptocurrency payments processor CoinPayments registered the rapid increasing of popularity of Tether — a stablecoin pegged 1:1 to a United States dollar — as a means of payment. On the site, which has a 2.4 million user base, Tether currently accounts for 30% of volume, which is 30 times more than a year ago.

Tether undermines Ether’s leadership?

Bitcoin application as a means of payment has seen a nearly 60% drop in volume from 80% last year, according to CoinPayments, while Tether has pushed Ether out of second place. Users purportedly choose Tether due to the stablecoin’s capability to avoid price fluctuations. Sean Mackay, operations lead at, said:

“Merchants used to accept Bitcoin, Ethereum, Ripple and convert it into Tether in order to hedge against the volatility. Now we are seeing the payments just being done directly in Tether.”

Also, Tether has seen wider adoption among the types of merchants who have difficulty getting credit-card processing services or who are forced to pay high card processing fees.

Multimillion token mint and new offerings

In mid-September, Tether minted 300 million USDT as part of the swap from the Omni protocol to the Ethereum blockchain. However, no token burn on the Omni blockchain had taken place at the time. In July, Tether accidentally minted and subsequently burned 5 billion USDT tokens.

Also last month, Tether announced the launch of a new stablecoin tied to the offshore Chinese yuan dubbed CNHT. The new currency joins Tether’s other stablecoins backed by U.S. dollars (USDT) and euro (EURT).

As part of its further offerings expansion, Tether plans to release a version of the stablecoin backed by a basket of commodities such as gold, crude oil and rubber.

Source Cointelegraph

‘I’m not buying anything,’ says Tron CEO Amid Reports of Poloniex Acquisition

Tron (TRX) founder and CEO Justin Sun has possibly refuted recent reports suggesting that he is leading an investment group behind the acquisition of cryptocurrency exchange Poloniex.

In a tweet published on Oct. 19, Sun has claimed that he is “not buying anything,” noting that he is an investor and disclosing some of his crypto assets:

“Just invest some and help out my friends. Actually I have a huge bag of $BNB, $HT, $OKB etc and bet on all exchanges that support $TRX & $BTT.”

As Cointelegraph reported on Oct. 18, the United States-based crypto exchange Poloniex is spinning out from global financial services company Circle to form a new trading platform that will not support customers based in the U.S.

Polo Digital Assets, the new company behind Poloniex, is backed by an unspecified Asian investment group, according to an official blog post.

Did Sun acquire Poloniex?

On Oct. 18, industry news outlet The Block has also reported that Sun is allegedly involved with the aforementioned Asian investment group, according to anonymous sources at Circle.

Per the article, Sun is leading the investment consortium and made a personal appearance at Circle’s headquarters. Poloniex’s employees were also reportedly asked whether they prefer to stay at Circle or move to Polo Digital Assets.

On Sept. 26, Sun announced that he will reschedule his charity lunch with Berkshire Hathaway chairman and billionaire Warren Buffett “very soon.”

Source Cointelegraph

Global Wash Trading on Crypto Markets Down by Over 35%, BTI Reports

Global wash trading on cryptocurrency markets was down by over 35% in September, according to the latest surveillance report from the Blockchain Transparency Institute (BTI).

Kraken, Poloniex, Coinbase and Upbit are still the “cleanest” platforms

Per the report, global wash trading was reduced by 35.7% among the exchanges on the Institute’s top-40 listings. BTI’s data indicates that the “cleanest” platforms continue to be Kraken, Poloniex, Coinbase and Upbit.

At the other extreme, OKEx and Bibox appear to have the highest percentage of wash trading among the top 40. While the wash traded volumes on these platforms exceed 75%, according to BTI, their real volumes (calculated without wash trades) still consistently place them among the top 20 exchanges globally.

Bitcoin’s wash trading level is roughly 50%

Among other cryptocurrencies, Bitcoin (BTC) is being wash traded just under 50%, according to live tracking data from BTI. Ethereum levels are at around 75%, XRP at 55% and Litecoin at 74%. BTI claims that most of this inflated volume is attributable to activity on OKEx, Bibox and Huobi.

The most heavily wash traded tokens among the top 25 cryptocurrencies are Ethereum Classic, Monero and Dash at over 80% fake volume, which BTI attributes largely to OKEx, Bibox and Bithumb. 

Under 25% each are Maker Dao, Binance Coin and LEO as the least wash traded tokens in the top 25 coins.

Wash trading refers to a practice whereby sell and buy orders are simultaneously placed on the same asset to artificially inflate trading volumes while giving the impression that the asset is more in demand than it actually is. The practice is illegal on regulated exchange platforms.

OKex challenges BTI’s allegations

As Cointelegraph reported, OKeX has recently hit back at BTI, claiming that the Institute’s “research methodology is not transparent and they do not provide data to back up their claims.” 

OKEx contends that, given its nature as a crypto derivatives platform, its characteristic patterns of trades — from “hedge funds, proprietary traders and high-frequency trading firms” — follow a different pattern to spot-only venues. 

It has therefore argued that BTI’s use of “retail-oriented parameters such as website/mobile traffic” in its research is “an apple-to-orange comparison.”

In March, the topic of was trading has already become a hotly contested issue following a series of bombshell reports that revealed the apparent prevalence of manipulative trading practices in the industry.

Cointelegraph News