Tuesday, June 12, 2018 

TokenReporter: Big Data and Blockchain may blow your mind


The Update

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Quick thought

Are you as frustrated by geographical region lockout as I am? The notion that I can’t see an LA Times article because of their non-compliance with GDPR, or can’t see an ICO whitepaper because I’m in the US is a real impediment to research, commentary, and basic information sharing. The difficulty viewing whitepapers is a result of the US SEC and other governments cracking down on ICOs. It’s chilling. Meanwhile, the SEC is quoted below as saying they are underwhelmed by the lack of voluntary reporting by exchanges trading ICOs.

Secondly, Big Data and Blockchain. We talk a lot about privacy and blockchain, or storing sensitive information in it. What happens when the owners of data can sell access in order to enable big data analysis? What types of things can analysis be applied to? What kinds of data are ripe for this and what kinds of information could be revealed that isn’t visible from the surface? That’s a lot of what-ifs. The obvious domains are biological information, at least at first. Come into the Strike channel and let me know if we’re thinking correctly, or this is a subject that doesn’t go very deep.

Two token sales to watch 👁️

Rego sets out to make international real estate easier. Unifying listings, verifying the listings, and using their token and smart contracts to complete purchases and rentals. The token makes sense as a way to smooth the difficulty with international transactions and minimize the issues that come from working through traditional financial intermediaries. Whitepaper

Alphacon Network is a little more ambitious. Alphacon wants to take all medical records and place them on a blockchain. This isn’t the first time we’ve heard this. However, what we are hearing that’s different here is the desire to do it in combination with Big Data analysis of data from wearable devices, genetic information, and tissue mineral analysis. The initial population of data comes from My23, whose customers may agree to put genetic data into Alphacon. Gene analysis of natural characteristics reveals which genes are most likely to affect which diseases, and prevent genes that are causing genetic diseases from being replaced or operated in advance. They look at immunity data, as well as a biochemistry approach to predicting the cause of symptoms. The economy comes into play when companies want to purchase personal healthcare information and the owner of that data (the patient) agrees to sell it. Whitepaper.

The Good, the Bad, and the Ugly 😊😠👹

😊GOOD: 

Ripple for blockchain education

Ripple just donated $50 million and launched the University Blockchain Research Initiative (UBRI). In a press release, the company explained that UBRI is “a collaboration with top universities around the world to support and accelerate academic research, technical development, and innovation in blockchain, cryptocurrency and digital payments.” As much as 17 universities will benefit from this initiative.

As funding and the demand for blockchain talent grows, universities are in a position to put themselves on the forefront of a growing industry. Forecasts show that the global blockchain technology market is predicted to reach $2.3 billion by 2021. The Upwork report shows that just this year blockchain development “experienced more than 6,000 percent growth over the same period last year.” It’s by far the hottest skill on the job market.

SEC: Cryptocurrencies like Bitcoin are not securities

In an interview with CNBC, the U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton attempted to clear up the crypto asset classification. Bitcoin is not a security since it acts as a replacement for fiat currencies like the dollar, the yen, the euro, while all initial coin offering (ICO) tokens classify as securities, claims Clayton.

“A digital asset where I give you my money and you go off and start a venture […] and in return for me giving you my money, you say, ‘You know what, I’m going to give you a return’—that is a security, and we regulate that. We regulate the offering of that security, and we regulate the trading of that security.”

Despite having praised the distributed ledger technology for its “incredible promise,” Clayton pledged he would not support the redefinition of securities to accommodate technological innovation. “We are not going to do any violence to the traditional definition of a security that has worked for a long time,” he decidedly stated.

Conversely, a high-profile team from Debevoise & Plimpton that consists of former SEC Chair Mary Jo White and former Enforcement Director Andrew Ceresney defends Ripple Labs against a securities fraud lawsuit that alleges the Ripple token as the sale of unregistered securities.

Connecticut for blockchain

This week, Connecticut Governor Dannel Malloy signed into law SB443. The bill establishes a working group to study blockchain implementation and create a strategy for "fostering the expansion of the blockchain industry in the state." 

According to the bill, the task force will:

“(1) Identify the economic growth and development opportunities presented by blockchain technology; (2) assess the existing blockchain industry in the state; (3) review workforce needs and academic programs required to build blockchain expertise across all relevant industries; and (4) make legislative recommendations that will help promote innovation and economic growth by reducing barriers to and expediting the expansion of the state's blockchain industry.”

This study along with recommendations must be submitted to the joint standing committees of the General Assembly by January 1, 2019.

In May, the New York state proposed a similar bill to create a blockchain task force to study the potential effects of cryptocurrencies on financial markets in New York.

Political Candidates in Colorado may soon accept contributions in cryptocurrency for their political campaigns. Currently, Secretary of State Wayne W. Williams opened to the public the draft of the proposal and awaits commentary. The document stipulates:

“A committee may accept contributions in cryptocurrency, up to the acceptable limit for a cash or coin contribution. The amount of the contribution is the value of the cryptocurrency at the time of the contribution. The committee must report any gain or loss after the contribution as other income or receipts.”

Cryptocurrency donations would be treated like any other in-kind donations and, according to the Federal Election Committee's (FEC) 2014 opinion, would have to be returned or refunded, if their value exceeded the designated limit.

Bitcoin donations are nothing new. In 2014, a New Hampshire gubernatorial candidate, Andrew Hemingway, accepted $2,000 in Bitcoin. Similarly, in 2015, Patrick Nelson, New York's democratic candidate, accepted crypto while running for Congress.

 
😠BAD: 

SEC “underwhelmed” due to lack of self-reporting

At the Exchange and Brokerage Conference on Wednesday, SEC Director of Division of Trading and Markets Brett Redfearn and Chairman Jay Clayton both expressed dissatisfaction with U.S. exchanges’ unwillingness to cater to regulators’ warnings.

"We're underwhelmed by the enthusiasm for coming within the regulatory structure right now," said Brett Redfearn. "There are a number of exchanges that are trading ICOs that I would think that we would see more registrations."

The categorization of an asset as a security is determined by the Howey Test, a standard that came from a 1946 Supreme Court case (SEC v. W.J. Howey Co.). Redfearn himself admitted that there is an ounce of ambiguity regarding the asset classification. “Quite frankly,” he said, “not all of them are obvious on its face exactly what it is.”

Meanwhile, SEC designed a new position to overlook cryptocurrencies and ICOs and appointed Valerie A. Szczepanik as Associate Director of the Division of Corporation Finance and Senior Advisor for Digital Assets and Innovation.

Szczepanik will work across SEC divisions to evaluate how digital assets and their technology factor into existing securities laws. This new hire may indicate that government’s hands-off approach towards crypto may be a thing of the past. The financial watchdog seems to be trying to balance investor protection and technological innovation in this multi-billion dollar market.

The South Carolina’s Office of the Attorney General has ordered blockchain startup ShipChain to cease and desist from conducting business in the state. The tokens offered by ShipChain during its ICO fell under the state’s legal definition of securities. By selling unregistered securities, the company violated the state’s securities laws.

The Attorney General’s order states:

At all times relevant to this Order, Respondent ShipChain continuously offered investment opportunities in the ShipChain platform and the corresponding tokens to South Carolina residents through its website and in-person events held in South Carolina.

At no time relevant to the events stated herein was Respondent ShipChain registered with the Division as a broker-dealer, and no exemption from registration has been claimed by Respondent ShipChain.

At no time relevant to the events stated herein were the securities at issue registered with the Division or federal covered securities, and no exemption from registration has been claimed by the Respondent.”

The ShipChain has been given 30 days to request a hearing. 

“We are aware of the letter that was sent to us by the Attorney General of South Carolina,” ShipChain tweeted. “Rest assured that our lawyers are working on corresponding as fast as they can. We will keep you updated as soon as we have more information.”


👹
UGLY: 

Crypto mining malware infects 40,000 machines

According to security researchers at GuardiCore Labs, the campaign called Operation Prowli spread malware and malicious code to servers and websites and has compromised more than 40,000 systems of nearly 9,000 companies across the world. The hackers’ goal is to distribute malware and obtain full control over a wide range of devices with the r2r2 worm—a malware that executes SSH brute-force attacks from the hacked devices. After compromising the servers, the malware infects the server or device with Monero XMR miner. It primarily attacks industries such as finance, education, and government.

The Wall Street Journal informs that the number of fraudulent Initial Coin Offerings (ICOs) available today could amount to a larger sum than earlier stipulated.

“In a review of documents produced for 1,450 digital coin offerings, The Wall Street Journal has found 271 with red flags that include plagiarized investor documents, promises of guaranteed returns and missing or fake executive teams,” informs the article.

These ICO scams “displayed all characteristics of deceptive Ponzi-schemes.” Despite the authorities’ widespread appeal to conduct extensive research before participating in an ICO, investors have spent over $1 billion on a number of shady projects. Of that amount, lawsuits reclaimed only $273 million. Even though the U.S. Securities and Exchange Commission (SEC) is cracking down on fraudulent ICOs, novice investors should conduct prior research before parting with their money to at least try to avoid getting scammed.

 

This week, the altcoin Verge (XVG) was hacked a second time in two months. Verge is known for its tight security and the protection of users’ real identities, which created a lot of excitement in the community, drawing thousands of investors to its platform. 

At the beginning of April, Verge was hacked of 250,000 XVG and, as a result, lost 25 percent of its value due to the media follow-up. This time the hackers stole a sum of 35 million XVG (worth about $1.7 million).

The hack seems to have come as a shocker for PornHub, the privacy coin’s latest partner. Looking at the latest events, the future of Verge remains uncertain.

 

News 🆕

Coinbase acquires financial firms to become a SEC-regulated broker-dealer

The world’s biggest cryptocurrency trading platform is fighting to become a federally regulated broker-dealer. President & Chief operating officer Asiff Hirji wrote in a blog post that Coinbase is in the process of acquiring a broker-dealer license (B-D), an alternative trading system license (ATS), and a registered investment advisor (RIA) license. Moreover, Coinbase announced its acquisition of securities dealer Keystone Capital Corp., Venovate Marketplace, Inc., and Digital Wealth LLC.

“[W]e believe this is an important moment for the crypto ecosystem and yet another indication of the maturation of the crypto economy. If approved, these licenses will set Coinbase on a path to offer future services that include crypto securities trading, margin and over-the-counter (OTC) trading, and new market data products.”

The company intends to seek approval from SEC and the Financial Industry Regulatory Authority (FINRA) in an attempt to become “the most trusted way for our customers to buy, sell, and use many different types of crypto assets.”

In May, the company announced four new products aimed at that investor class: Coinbase Custody, Coinbase Markets, The Coinbase Institutional Coverage Group, and Coinbase Prime. Coinbase extends an invitation to institutional investors who are cautious to dive into the crypto asset class.

John McAfee is running for president [again]

John McAfee, founder of McAfee Antivirus Software and now prominent crypto enthusiast, announced his willingness to run for president in 2020. This will be McAfee’s second run for the highest office after he lost his first bid in 2016 to former New Mexico governor Gary Johnson to be the candidate for the Libertarian Party.

“In spite of past refusals, I have decided to again run for POTUS in 2020,” he tweeted. “If asked again by the Libertarian party, I will run with them. If not, I will create my own party. I believe this will best serve the crypto community by providing the ultimate campaign platform for us.”

McAfee is very sober about his chances. His primary objective is to bring great publicity to crypto.

“Don't think that I have a chance of winning. I do not. But what truly changes America is not the president, but the process of creating one. If my following is sufficient, I get to stand the world's largest stage and talk to the everyone, as I did last time, to tell the truth.”

 Kazakh President Nursultan Nazarbayev is calling for a unified legal framework related to the use of cryptocurrency, urging the global community to work together. He believes that the cryptocurrency phenomenon will change the financial market so drastically that, according to experts, 200 to 500 of the largest companies will disappear within ten years.

“It is necessary to start developing common rules,” President Nazarbayev said on May 17 at the 2018 Astana Economic Forum, as reported by TengriNews. “Most countries are actively exploring the possibility of adapting cryptocurrency to the current configuration of financial systems … At the same time, we see completely separate actions of states in this issue. And these disparate actions will lead to inefficiency.”

Accordingly, he suggested that the United Nations should spearhead the effort.

“I propose that this initiative be implemented on the United Nations’ platform—the only body that is elected by the entire human society to solve very serious problems,” he continued. “There is a need to build new effective mechanisms for dialogue between states.”

 

Coinbase is launching a new version of its GDAX exchange called Coinbase Pro and is acquiring Paradex.

Coinbase informs in a blog post:

Since launching in 2015, GDAX has built liquidity and stability in the space and also helped us understand the needs of active crypto traders. Switching to the name Coinbase Pro is a recognition that the individual active trader requires a product completely dedicated to their specific needs.

The platform will offer professional trading tools and services, delivered through a completely re-engineered UI that will make the trading experience easier and more intuitive.

This move marks another attempt of the company to stay ahead of the game in an increasingly competitive crypto economy. Coinbase has been developing a new strategy. Just last week, attempting to lure big institutional investors, the company launched four new products: Coinbase Custody, Coinbase Markets, The Coinbase Institutional Coverage Group and Coinbase Prime. Moreover, the company is also said to be exploring the possibility of obtaining a banking license, according to the Wall Street Journal.

 Disclosure

We will run advertising in the newsletter and if would like to appear at the beginning or end of this newsletter please email joanna@cabalpartners.com We do not expect that we will run a token sale to fund this newsletter but Victor or I may run our own token sales later in the year.

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PublishedLast save May 16

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