CoinDesk Crypto

Russian courts are making conflicting rulings on whether bitcoin and other cryptocurrencies count as property.

In one new case, Saint Petersburg’s district court has refused to force bogus law enforcement officers to return cryptocurrencies extorted from a victim on the basis that digital assets are not legitimate assets.

According to the press office Telegram channel for the Saint Petersburg courts, the district court convicted two men for extorting money from an unnamed cryptocurrency OTC trader on June 30. 

Related: German Regulator Had Just 1 Person Checking Wirecard’s $3.1B Books: Report

The criminals had pretended to be officers of Russia’s law enforcement and counter-terrorism agency, the Federal Security Service (FSB) – the successor of the KGB.

Threatening to beat and torture the victim, as well as faking that they’d opened a felony case against him, Petr Piron and Eugeny Prigozhin forced the victim to pay them 5 million rubles (over $70,000) in cash and transfer 99.7035 in bitcoin and some DigiByte and BitShares tokens to their digital wallets. The bitcoin alone is worth over $900,000 at current prices.

According to the court press release, the victim has been handed back the cash that was stolen. However, the court did not rule that the cryptocurrencies should also be transferred back. The court’s website confirms the convictions, although it does not provide the text of the ruling. 

The press release, however, points out that, under the Russian Civil Code, cryptocurrencies have no legal status and therefore cannot be deemed property for the purpose of a criminal case.

Related: E-Gold Claims US Officials Buried Key Report in 2008 Landmark Crypto Ruling

The decision is nothing more than a mistake, believes crypto-savvy lawyer and deputy head of the Chamber of Tax Consultants in Russia, Mikhail Uspenskiy. “The stance that cryptocurrency is some kind of a dummy and has no legal significance, is deeply flawed and erroneous,” Uspenskiy told CoinDesk. 

He pointed out that, previously, the Russian courts have recognized crypto as a form of property. Uspenskiy cited the case of Ilya Tsarkov, who filed for bankruptcy in 2017 and was forced to reveal his crypto holdings so that they can be included in his estate for bankruptcy proceedings. 

There have been also criminal cases in which the courts treated crypto assets like a form of property, such as when bitcoin was extorted during blackmail or fake banknotes exchanged for crypto, Uspenskiy said. 

And in another case, after a Russian court refused to recognize crypto losses claimed by ICO investors who used an online investment platform called ICOadm.in, a Moscow court of appeals backed the original ruling, but did define cryptocurrency as “other kind of property.”

The appeals court further said that, under Russian law, crypto is not defined either as property, an asset, a money surrogate or information.

That may soon change. In June, a package of draft bills was introduced in the country’s parliament, the State Duma, suggesting that cryptocurrencies should be treated as property. The bills would also, however, prohibit any operations with crypto using Russia-based infrastructure.

The initiative has been criticized by Russia’s Mininstry of Economic Development and Ministry of Justice, as well as by the crypto community advocates in the country.

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Cardano holders will soon be able to stake tokens securely at Coinbase Custody.

• At the Cardano Virtual Summit Friday, chief developer house IOHK announced it had signed an agreement with Coinbase Custody.
• From Q4 2020, users will be able to stake their ADA tokens from inside Coinbase’s cold storage.
• In proof-of-stake blockchains, like Cardano, blocks are verified by token holders (rather than miners as with blockchains like Bitcoin), who receive rewards in return.
• Cardano’s staking protocol, Shelley, is expected to come online later this month with staking rewards beginning in mid-August.
• Sam McIngvale, Coinbase Custody’s head of product said their regulated product would help projects, like Cardano, find more mainstream acceptance.
• Tezos inked a similar staking agreement with Coinbase Custody in November 2019.

• Former US Treasury Secretary Larry Summers Expects ‘A Ton of Innovation’ Around Stablecoins
• Cardano Developer IOHK Launches $20M Fund for Ecosystem Startups
• US Appeals Court Allows Warrantless Search of Blockchain, Exchange Data
• Coinbase Takes Over Servicing for 21Shares’ Bitcoin ETP, Displaces Kingdom Trust

Germany’s accounting watchdog reportedly had only one person checking Wirecard’s books in the months before the company admitted to the massive accounting irregularities that led to its insolvency.

• Sources speaking to Reuters on Thursday said Germany’s chief financial regulator, BaFin, had assigned only one staff member at the Financial Reporting Enforcement Panel (FREP) to report on Wirecard’s books in 2019.
• FREP is a privately owned agency with a contract with BaFin.
• Wirecard claimed in February that it had earned revenue upwards of €2.8 billion (~$3.1 billion) in 2019.
• On June 18, the Munich-based company admitted that some of its employees had purposefully inflated revenue, resulting in an estimated $2.1 billion black hole.
• FREP’s report had not been published by that point and has still not been made public.
• The private agency had previously assured BaFin that it had investigated Wirecard as far as it could, Reuters said.
• A spokesperson said Wednesday that it was not FREP’s responsibility to investigate accounting fraud.
• BaFin has since confirmed it will be canceling its contract with FREP.
• On June 23, Wirecard’s former CEO Markus Braun was arrested on suspicion of accounting fraud and market manipulation.
• The collapse of Wirecard meant cryptocurrency firms TenX and Crypto.com cards temporarily stopped working; they were reactivated earlier this week.

• E-Gold Claims US Officials Buried Key Report in 2008 Landmark Crypto Ruling
• Swiss Government Makes Moves to Encourage Crypto Businesses
• Wirecard Fallout: Auditor EY Accused of Not Flagging $2.1B Black Hole Sooner
• Mapping the Future of the SEC (There’s a Nonzero Chance Hester Peirce Takes Over)

Ever since its inception, bitcoin has been dubbed “digital gold,” given it is durable, fungible, divisible and scarce like the precious metal. 

However, while gold has a strong track record of rallying in times of stress in the global equity markets, bitcoin is yet to build a similar reputation as a safe-haven asset.

In fact, in recent months, the cryptocurrency has been increasingly correlated with the S&P 500, Wall Street’s equity index and benchmark for global stock markets. Now, data suggests that relationship is stronger than ever, likely denting its appeal as digital gold. 

Related: Market Wrap: Bitcoin Briefly Breaks Below $9K, but Markets Remain Comatose

The one-month bitcoin-S&P 500 realized correlation rose to a record high of 66.2% on June 30 and stood at 65.8% on Thursday, according to crypto derivatives research firm Skew, which began tracking the data in April 2018.

“While bitcoin and S&P 500 correlation is always a very good indicator of market movement, it never really maintains a consistent position. Bitcoin behaves more like a highly leveraged position and follows the market trends in a more volatile, dramatic up and down swings,” said Wayne Chen, CEO and director of Interlapse Technologies, a fintech firm. 

The one-month metric oscillated largely in the range of -30% to 50% for 12 months before rising to record highs above 60% on June 30. The data indeed shows that bitcoin’s correlation with the S&P 500 is somewhat inconsistent. 

The one-year correlation has also risen to lifetime highs above 37%, according to Skew. One should note, though, that readings between 30% to 50% imply a relatively weak correlation between variables. 

Related: Bitcoin Miners Saw 23% Revenue Drop in June

“Bitcoin, by all accounts, is still a risk asset. Despite those who may tout its fundamental similarities to gold, it has not yet proven to be a sufficient hedge or a flight to safety in times of risk-off sentiment,” said Matthew Dibb, co-founder of Stack, a provider of cryptocurrency trackers and index funds. 

Risk assets are the those with fortunes tied to the state of the global economy. For instance, prices of stocks and industrial metals like copper tend to rise when the global economic growth rate is expected to pick up pace and falter during an economic slowdown.

Bitcoin has more or less behaved like a risk asset this year. The cryptocurrency’s price fell from $10,000 to $3,867 in the first half of March, as global equities cratered on coronavirus fears. It then rose back toward $10,000 in the following two months as the S&P 500 saw its fastest bear market recovery on record. 

However, being treated as a risk asset may be a blessing in disguise for bitcoin.

“Given that the correlation between BTC and equities is still so high, our expectation is that this is only bullish for bitcoin price in the short term, as global markets benefit from an unprecedented amount of monetary stimulus,” said Dibb. 

Indeed, the U.S. Federal Reserve (Fed) and other major central banks are injecting massive amounts of fiat liquidity into their respective economies to counter the COVID-19 slowdown. As of last week, Fed’s balance sheet size was $7.01 trillion – up 67% from $4.24 trillion in early March, according to data provided by the St. Louis Federal Reserve. 

While bitcoin is struggling to establish itself as a haven asset, some investors remain undeterred. 

“HODLers” or long-term holders of bitcoin, as gauged by the number of addresses storing bitcoin for at least 12 months, rose to a lifetime high of 20.3 million in June. That surpassed the previous high of 19.52 million reached in May, as per IntoTheBlock, a blockchain intelligence company. 

“With the halving just recently complete, many holders believe that Bitcoin’s median price should be a lot higher than the current value. This creates more of a hodl type of behaviour until the market starts building steam again,” said Chen.

The metric set a new record high for the 12th straight month in June. Notably, the number of holders is up 22% year-on-year, even though bitcoin’s price is down 25% over the same period. 

At press time, the cryptocurrency is trading at $9,110, having dipped to lows near $8,930 during the U.S. trading hours on Thursday. 

Disclosure: The author holds no cryptocurrency assets at the time of writing.

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A defunct  digital currency project that was a precursor to bitcoin has claimed the U.S. government suppressed crucial evidence in a 2008 landmark case that has since shaped the cryptocurrency industry.

• E-Gold’s former directors filed a petition Tuesday for a writ of coram nobis – in which the court changes the original judgment upon discovery of a fundamental error – at the District of Columbia court.
• Founded in 1996, E-Gold allowed users to trade digital units backed by precious metals – at its peak, the company held around $85 million in gold.
• The U.S. government charged E-Gold with being an unlicensed money transmitter in 2007; the project’s directors pleaded guilty in 2008.
• The ex-directors now claim in court that the federal government unlawfully concealed a 2006 review from Florida’s Office for Financial Regulation (OFR) so they “could make an example” out of E-Gold.
• Per the filing, the OFR review said E-Gold did not count as a money transmitter, as the gold-based asset was closer to a commodity than a fiat currency under state law.
• E-Gold’s former directors claim the court’s judgment would have been substantially different had they been allowed access to the OFR review
• The E-Gold case effectively extended the definition of “money transmitter” in the U.S. to include any system that stored and transferred value.
• Many crypto businesses subsequently have had to be regulated as money transmitters in individual states if they want to operate legally in the U.S.

See the full filing below:

See also: Lessons From the First Digital Gold Boom

• German Regulator Had Just 1 Person Checking Wirecard’s $3.1B Books: Report
• Swiss Government Makes Moves to Encourage Crypto Businesses
• Mapping the Future of the SEC (There’s a Nonzero Chance Hester Peirce Takes Over)
• New York Regulator Adds 3-Strike Rule for BitLicense Applicants

B21, a recently launched mobile app aimed at first-time cryptocurrency investors, has expanded its service to the India market.

• The Gibraltar-based company said the move was prompted by rising consumer interest and trading volumes in the nation after India’s Supreme Court recently overturned the central bank’s order banning banking services for cryptocurrency firms such as exchanges.
• B21 users can fund their investments using Indian rupees through payment methods such as the Unified Payments Interface, debit cards and bank transfers. 
• The app allows investments in cryptocurrencies like bitcoin, ether and EOS starting with a $25 (2,000 INR) minimum, and is available in 65 nations including the U.S.
• B21 crypto assets are secured by Prime Trust, the app provider says.
• The app launched earlier this year, targeting newcomers to crypto investing.
• The Reserve Bank of India’s (RBI) de facto crypto ban was lifted in March, with the central bank later confirming there is no restriction on banking for digital asset firms.
• Since then, the local cryptocurrency industry has seen something of a renaissance, however, the regulatory situation is still uncertain.
• Rumors that India’s government might be considering a new ban on crypto were reported in mid June.
• One of the top crypto exchanges by trading volume, Binance, recently joined the Indian tech industry association that fought the RBI ban in court.

• Why Bitcoin Bulls Are Betting on Explosive Growth in India
• Swiss Equity Firm Makes First Crypto Investment With SPiCE VC Stake
• The Big Thing Holding Back India’s Crypto Boom
• ParaFi Invests in Kyber Network as Buzz Grows Around DeFi Projects

Cardano developer house IOHK has set up a $20 million “cFund” alongside Los Angeles-based Wave Financial.

• The fund has a broad remit to invest in startups and early-stage businesses that use Cardano and other IOHK tech initiatives – such as enterprise blockchain ATALA.
• Commits will range between $250,000 and $500,000 for either equity or token stakes.
• The cFund is a 50/50 venture: IOHK has already put in the “anchor” $10 million, and Wave plans to raise the other half from external investors.
• Nathan Kaiser, IOHK’s general counsel, will become cFund’s chief investment officer.
• An IOHK spokesperson said cFund did not overlap with EMURGO – Cardano’s commercial arm – which has also supported new ventures.
• Californiaregulated Wave Financial tokenized a year's supply of Kentucky Bourbon whiskey worth $20 million earlier this year.
• Both sides had been in talks for many months; the fund’s launch was delayed due to the coronavirus outbreak.
• Both Hong Kong-based IOHK and Wave declined to comment on whether the fund had already started selecting projects to invest in.

Edit (10:30 UTC): This article previously indicated that Wave Financial was based in Canada, based on information on its website. It is, in fact, based in Los Angeles and London.

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• Crypto News Outlet BlockTV Shuts Down, Citing Impact of COVID-19

A 52-year-old Singapore man has been found guilty of promoting OneCoin, the multi-level marketing, or Ponzi, scheme based around its own cryptocurrency.

• On Wednesday, Fok Fook Seng was convicted and fined S$100,000 (almost US$72,000) for marketing OneCoin between January 2016 and June 2017, as reported by The Straits Times on Friday.
• The Singapore Police Force said the man is the first to be charged under the Multi-Level Marketing and Pyramid Selling (Prohibition) Act, 2000.
• Fok used the Facebook page “OneLife One World Team Singapore” to advertise OneCoin and promote it at major events.
• Victims – around 1,180 people from Singapore and elsewhere – would be sold educational packages that came with tokens said to be usable for “mining” the OneCoin cryptocurrency, per the report.
• OneCoin has been deemed fraudulent in the U.S. with “top leaders” Ruja Ignatova and Konstantin Ignatov indicted on charges of wire fraud, securities fraud and money laundering in May last year.
• New Zealand has also issued warnings against fraudulent crypto scams involving OneCoin.
• A jury convicted OneCoin's Lawyer Mark Scott on fraud charges in November 2019 after it was revealed he laundered $400 million for the scheme beginning in 2016.
• Those convicted under Singapore’s law face fines of up to $200,000 Singapore dollars ($143,340) and/or five years in prison.

See also: Scams, Schemes and Crypto Privacy, Feat. Preston Byrne

• Singapore Begins Crackdown on Unlicensed Bitcoin Sellers
• How to Spot a Crypto Scam
• New Zealand Police Seize $90M Linked to Alleged BTC-e Exchange Operator
• Singapore Ride-Sharing App Lets Customers Pay With Bitcoin

Switzerland’s InCore Bank AG has become the first financial institution in the country to offer banking services to Kraken clients.

• Announced Thursday, the move means clients located in the EU will be able to fund their accounts using Single Euro Payments Area (SEPA) deposits – the payment integration project the EU designed to simplify euro bank transfers.
• The companies said the move comes at a time when institutions and traders are seeking alternative sources of capital value during an “uncertain macroeconomic climate.”
• Rudy Suter, a strategy consultant for digital assets at InCore Bank, said the bank's new strategy is based on three pillars: cryptocurrencies, tokenization and blockchain applications.
• “As digital assets, cryptocurrencies are a valuable addition to modern asset management and will be indispensable as a payment and investment value in the future,” said Mark Dambacher, InCore’s CEO in a statement.
• The companies plan to enable deposits in British Pounds (GBP), Swiss Francs (CHF) and Canadian dollars (CAD) in Q3 2020.
• According to a recent study by research firm Finery Tech, Kraken possesses the deepest bitcoin to euro liquidity in Europe as of June 2020.
• InCore Bank AG is the 209th-largest bank in Switzerland in terms of total assets under management.
• Kraken is rated the 10th-largest crypto exchange in the world by trade volume, according to data analytics website Nomics.
• Last month Kraken extended its services to Australia, enabling local clients to fund their accounts in Australian dollars (AUD).

See also: $103M Bailout Denied for Coronavirus-Hit Firms in Switzerland’s ‘Crypto Valley’

• Sri Lanka’s Blockchain Bank KYC Platform to Enter Development ‘Shortly’: Central Bank
• Swiss Government Makes Moves to Encourage Crypto Businesses
• Kraken Pledges $150K for Development of Open-Source BTCPay Server
• Germany’s Neufund Shuts Down Security Token Platform, Saying BaFin Failed to Act

We might be entering into the era of genetically modified yield farming. Or maybe decentralized finance (DeFi) just doesn’t make sense anymore.

There are currently far more DAI in supply on Compound than there are DAI in the world, at least according to the numbers reported by Compound’s website. Assuming that nothing has gone awry there, the numbers seem impossible. But they might not be.

Liquidity on Compound is shifting dramatically between assets as new rules for distribution of its governance token, COMP, take effect.

Related: DeFi Insurer Nexus Mutual Maxed Out by Yield-Farming Boom

Compound’s website reports a gross supply of 401 million DAI right now even though there are only 148 million DAI in existence, according to DAI Stats.

The supply of DAI on Compound has skyrocketed from $42 million Wednesday.

The most reasonable explanation for this is that Compound counts each deposit of DAI as additional gross supply, even if that DAI was just borrowed and re-deposited. So imagine there were 100 DAI and a user deposited 200 USDC. They could then borrow all that DAI and deposit again. Many users are probably running a few wallets to make this work more easily. 

As Electric Capital’s Ken Deeter put it in an email to CoinDesk, “Note that this is actually what banks do with USD as well. If I deposit $100, and $90 gets lent out, someone gets paid with that $90 and they deposit it in the bank. Now there’s $190 in the bank even though there was only $100 to start with.”

Related: Investment Firm Plans ETF-Like Product for Compound Yield Farmers

At about 21:00 UTC on Thursday, Instadapp put out the message that it was time to move deposits from USDT to DAI in order to maximize yields and it seems like users took note. 

As we previously reported, the addition of COMP yields makes these machinations very lucrative.

The price of COMP is $178.80, as of this writing.

A rules change went into effect Thursday that tweaked the incentives for those looking to mine new COMP.

Previously, the rules had favored the basic attention token (BAT) market because it had the highest interest rates after massive deposits into its liquidity pools. The rules now only count total borrowed and total deposit, ignoring interest rates. So there’s no longer incentive to game a high rate with a risky cryptocurrency.

The total supply to Compound has gone from $320 to roughly $80, though yields on BAT remain strong, at 5.4%.

Read more: Compound Changes COMP Distribution Rules Following ‘Yield Farming’ Frenzy

At 7%, DAI has by far the strongest yield of any token on Compound right now, making it attractive to buy on the market and supply. With Tuesday’s change to the protocol – which went into effect today – all that counts for COMP earnings going forward are the total amount borrowed and lent. 

Yield farmers will look for the best risk-adjusted return and since DAI has the highest yield with low volatility, it’s a very clear bet. 

This was exactly what the MakerDAO community was worried about earlier this week. Cyrus Younessi, from MakerDAO’s risk team, wrote: 

“There is a chance (likelihood, even) that we see an unprecedented demand for Dai. Much of the natural supply for Dai could also be locked up in COMP farming, thinning out sell-side order books.”

As forum user “Maker Man” put it today in the MakerDAO chat, “Remember this whole COMP thing is a recycling issue – this is not necessarily draining DAI liquidity though it will tend to drive a siphon of it if it continues.”

UPDATE (July 3, 01:37 UTC): This story has been updated to reflect that fact that Compound reports more up to date figures on its main markets page than on individual token pages. CoinDesk reported in part from the latter, but has updated to the correct amounts.

• Compound Changes COMP Distribution Rules Following ‘Yield Farming’ Frenzy
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Bitcoin broke below $9,000 Thursday afternoon as the leading cryptocurrency has continued to trade in a tight range just above $9,000 for several weeks.

• Bitcoin at $9,060 as of 20:00 UTC (4 p.m. ET), down 2% over 24 hours
• BTC trading range (past 24 hours): $9,300 – $8,900
• Ether down 3% trading, at around $225
• Institutional investment continues despite sleepy market
• Nearly all cryptocurrencies down over 24-hour period

Despite the brief 3% afternoon drop, however, the cryptocurrency markets continue to stay eerily calm as volatility drops and traders continue to expect a big move. Bitcoin was changing hands at around $9,060 as of 20:00 UTC (4 p.m. ET). 

Ether, the second-largest cryptocurrency by market capitalization, dropped 3%, trading around $225 as of 20:00 UTC (4 p.m. ET), according to Coinbase.

Related: Bitcoin Miners Saw 23% Revenue Drop in June

Bitcoin teased bearish traders Thursday with a 3% dip from $9,250 to $8,930 in afternoon hours. The move sparked a series of liquidations on BitMEX, spiking to $30 million after the afternoon price move, according to Skew. Liquidations had been fairly flat for several days on the largest bitcoin derivatives platform.

Despite the afternoon drop, spot trading volumes were relatively stable relative to the preceding few days. Coinbase volume, for example, just barely edged out its Wednesday’s volume, reporting a total of $78 million traded. 

Despite the quiet price action, institutional investors continue to make moves in crypto markets. 

Norwegian crypto investment firm Arcane Crypto is planning to list on Nasdaq Nordic’s alternative stock exchange, CoinDesk reported Thursday. Arcane plans to issue 6.6 billion new shares – each at half a U.S. cent – to fund a $32 million take over by Swedish firm Vertical Ventures, which is facilitating the listing.

• S&P 500 flat, gaining less than 0.2%
• FTSE 100 up 1.3%
• Nikkei 225 down less than 0.2%
• Gold up 0.5% trading at $1,777

Related: Bitcoin Startup Zap Is Working With Visa

As bitcoin dipped, some of the darlings of the equities markets continued to soar. Tesla made a new all-time high for the second consecutive day Thursday, climbing to $1,228 in early trading hours. The technology stock opened 5% higher than its Wednesday close as its bullish momentum continues with ferocity. Zoom also made a new all-time high, trading at just below $264 during afternoon hours. 

See also: DeFi Insurer Nexus Mutual Maxed Out by Yield-Farming Boom

Social media stocks weren’t quite as lucky, dipping a bit on Thursday. Twitter dropped more than 1% Thursday. Facebook dropped 2.2%.

Cryptocurrencies in general were almost all in the red Thursday, according to Messari. The only digital asset categorized as a currency with a positive 24-hour return, according to its methodology, was monero (XMR) up 2.5%. 

In commodities, gold gained 0.5% on the day after recovering from 1% drop during afternoon trading hours. Crude oil gained more than 2%.

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Nexus Mutual is maxed out covering the risks associated with decentralized finance (DeFi) platforms.

“Our product has honestly seen massive interest since yield farming kicked off,” Nexus Mutual founder Hugh Karp told CoinDesk in an email. “With potential yields being so lucrative many users are looking to protect themselves against the risk of smart contract failure.”

Nexus Mutual provides a way to hedge against the risk posed by smart contracts, with policies that pay out against a failure in the underlying software of a DeFi product within a given time frame. 

Related: Why Bitcoin Bulls Are Betting on Explosive Growth in India

It made its first payments earlier this year following the attacks involving flash-loan provider bZx. The Nexus Mutual risk pool already doubled over the last quarter, but the craze following the release of Compound Finance’s governance token on June 15 has notched it up even further. 

Read more: Business Is Booming for DeFi Insurer Nexus Mutual Ahead of Ethereum 2.0

“In particular, there is big demand coming from hedge funds and more professional investors for our product, they want multi-millions of cover. As a result, we’ve hit our current capacity limits on the key yield-farming protocols such as Compound, Balancer and Curve,” Karp told CoinDesk.

On Nexus Mutual Tracker, a data site made by 1confirmation partner Richard Chen, Curve is at the top, with active per contract sitting at $695,000. Compound and Balancer are a close second and third, respectively, with $651,000 and $619,000 of cover.

Related: Market Wrap: As Traditional Markets Rally, Bitcoin Gets Boring

Those are the most well-covered contracts on Nexus now, but Balancer is only slightly ahead of payments system Flexa.

Nexus is run as a mutual company by holders of the NXM token. They have set limits of $630,000 in coverage on each protocol. That amount is based on how much is on hand to pay out claims. The token is designed to recruit more capital when it’s needed, however, so they may be able to take on more policies soon. 

Nexus currently has $5 million on hand to cover claims, up $1 million since earlier this month. It’s worth noting that there’s no need for users of Nexus to show a loss to use Nexus. They only need to take out a policy that the smart contract might break or be exploited to get paid out. 

Read more: DeFi Platform Opyn Launches Put Options on Compound Token

This is similar to Opyn, which allows users to take out short positions against various tokens dramatically losing value, whether they hold the token or not.  

Karp wrote, “Yield farming is certainly attractive due to the outsized returns, but it does come with increased risk; leverage and smart contract risk can be dangerous, so be careful out there.”

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Bitcoin miners suffered a 23% drop in revenue during June, resulting from lower network fees and a reduced block subsidy after the halving in May. 

Down from $366 million in May, bitcoin miners generated an estimated $281 million in revenue in June, a three-month low according to Coin Metrics data analyzed by CoinDesk. Estimates assume miners sell bitcoins immediately.

Mining is the process of adding confirmed transactions to the Bitcoin blockchain. For the resources required to mine, the network compensates miners via subsidies and transaction fees. Subsidies are paid per block at a current rate of 6.25 BTC. Fees are paid per transaction.

Related: Market Wrap: Bitcoin Briefly Breaks Below $9K, but Markets Remain Comatose

Compared to May, June subsidies and fees offer a better representation of mining revenue after the halving, said Austin Storms, founder of mining mobile infrastructure company BearBox. Even with an 11% decline in May, the month’s first 11 days of the month are weighted heavily from the 12.5 BTC per-block subsidy that later dropped to 6.25 BTC, Storms told CoinDesk. 

See also: Bitcoin’s Mining Difficulty Has Rarely Been This Static in a Decade

During the halving, the size of Bitcoin’s mempool grew substantially, which caused transaction fees to also increase. The mempool serves as a sort of holding depot for verified transactions that need to be included in new blocks by miners. As the mempool emptied through the end of May and into June, monthly miner revenue estimates reflect the subsequent decline in transaction fees. 

Fees only generated $12 million in June, which accounts for 4.3% of monthly revenue, down from a 12-month high of 8.3% in May. Since the per-block subsidy remains constant until 2024, growth in mining revenue can only come from two sources: an increase in network fees or bitcoin’s price.

• Bitcoin Startup Zap Is Working With Visa
• After Years of Resistance, BitPay Adopts SegWit for Cheaper Bitcoin Transactions
• Why Bitcoin Bulls Are Betting on Explosive Growth in India

New research shows certain wallets are vulnerable to a quasi double-spending attack, a federal appeals court effectively said blockchain data is not protected under the Fourth Amendment and more. Here’s the story:

You’re reading Blockchain Bites, the daily roundup of the most pivotal stories in blockchain and crypto news, and why they’re significant. You can subscribe to this and all of CoinDesk’s newsletters here. 

Law of the Land
The Senate Banking Committee plans to introduce legislation this week to study virtual currency’s role in illicit online activity. “Although the use and trading of virtual currencies are legal practices, some terrorists and criminals, including international criminal organizations, seek to exploit vulnerabilities” through them, the amendment read. Meanwhile, a federal appeals court on Tuesday effectively said searches of a suspect criminal’s blockchain activity does not violate the Constitutional Fourth Amendment’s protection against warrantless search and seizure in denying defendant Richard Gratkowski’s claims his blockchain and Coinbase-held bitcoin transaction records could not be used as evidence against him.

Related: Blockchain Bites: DeFi and DEXs Surge, Bitcoin’s Negligible Adjustment and an ICO Class Action

Shut Down?
The U.K. High Court of Justice has ordered crypto exchange GPay to be “wound up in the public interest.” In a statement Tuesday, the U.K. government said 108 clients had lost a total of just under £1.5 million ($1.9 million) using GPay, which also sold clients insurance to protect them against trading losses, but the exchange did not always pay out.

Bugs
Researchers at ZenGo have discovered a vulnerability in how certain wallets display Bitcoin’s replace-by-fee transactions, possibly enabling malicious actors to swindle funds from unsuspecting victims. The affected wallets ZenGo studied, Ledger Live, Breadwallet and Edge have fixed or are fixing the issue, though other wallets may be vulnerable. Meanwhile, cybersecurity firm Group-IB has identified a scam that uses victim’s personal information and celebrity deep-fakes to lure people to a website that details an investment scheme, which requires a 0.03 bitcoin ($276) fee to enter. (Decrypt)

Incumbents  
BlockFi says its monthly revenue has doubled as it sees a surge in new users for its crypto lending service and interest accounts. The revenue increase has been driven by bitcoin’s recent halving event in May, the company said, as well as the launch of a mobile app. Elsewhere, CNET founder Halsey Minor launched Public Mint, a “fiat native” blockchain that makes transactions efficient and accessible. Funds are held in insured banks, enabling users to create their own “digital money systems,” enabling companies using the platform to accept dollars via credit card, wire transfers and more whether or not they have a bank account. Finally, Coinbase Custody will secure assets used in 21Shares’ Bitcoin ETP in an offline storage solution, taking over from South Dakota-regulated Kingdom Trust.

Double Digits
June trading volume on decentralized exchanges set a record high of $1.52 billion, up 70% from May, according to data from Dune Analytics. This double-digit percentage growth is simply “the continuation of a trend dating back to the end of [2019],” Messari’s Jack Purdy said. Curve and Uniswap control the largest amount of traded volume, recording $350 million and $446 million, respectively, in June.

Related: First Mover: Crypto.com’s Chain Token Dominated Markets in June With 33% Gain

Tight Range
Wednesday evening, bitcoin broke above $9,250 for the first time since Friday as the leading cryptocurrency continues to trade in a tight range just above $9,000 for several weeks. Despite trading above $9,250, bitcoin is still stuck within a tight range of a few hundred dollars above $9,000. As a result, 30-day volatility continues to decline reaching its lowest mark since Feb. 23, according to Coin Metrics.

Retail Buyers
New research suggests that as the Bitcoin network continues to halve every four years, the daily supply of mined bitcoin will not be able to meet retail demand. The researchers propose that in 2024 when the daily supply will drop to 450 BTC, retail buyers could account for 50% of the need, and extrapolate out from there. (Decrypt) 

Valuing Bitcoin
Nearly half of investors in a recent survey said a lack of fundamentals keeps them from participating. In a 30-minute webinar July 7, CoinDesk Research will explore one of the first and oldest unique data points to be developed by crypto asset analysts: Bitcoin Days Destroyed. 

We’ll be joined by Lucas Nuzzi, a veteran analyst and a network data expert at Coin Metrics. Lucas and CoinDesk Research will walk you through the structure of this unique financial metric and demonstrate some of its many applications. Sign up for the July 7 webinar “How to Value Bitcoin: Bitcoin Days Destroyed.” 

Scott Alexander on the Value of Pseudonymity
Last week, Scott Alexander, the author of the influential rationalist blog Slate Star Codex (SSC), abruptly shut down (perhaps temporarily) his blog in advance of a New York Times (NYT) story on him and SSC that would include his real name. He tells of his decision in an interview with CoinDesk’s Ben Powers, abbreviated here.  

Are there circumstances under which you believe it would be appropriate to unmask an online persona?

This is a tough question, but I place it in the same realm as other tough questions like, “Are there times when violence is appropriate?” or “Are there times when the government should suppress speech?” There might be, but it needs a higher burden of proof than just “I don’t like this person.”

How do you respond to the people who say, “Your real name is already out there”? I know the blog post addresses it but it’d be helpful for you to lay out for our audience.

There are a lot of people who have had naked pictures of them leaked online who would still be entirely justified not wanting those pictures in the New York Times. I admit my security has been bad. But so far most people who google my real name don’t find my blog. People who do the opposite can find my real name with a little Internet savviness and a minute or two, and maybe the extra difficulty just makes me feel more secure without really keeping me any safer. But that extra feeling of security is still important to me.

Did you see an opportunity here to “Streisand Effect” your blog? I believe you have said in the past that traffic is down but that you’d also like to pivot out from your day job and do SSC-style work full time. So is there any fairness to a cynical view of your blog takedown as a way to relight the spark in the SSC community?

No, I didn’t do this, and would lose respect for anyone who did. I’m not sure what kind of evidence you want me to give. But if you want, you can confirm with Cade [Metz, the Times reporter] that I begged him, at great length, many times, over the course of days, not to use my real name in the article. I gave him a warning that I would delete the blog if he used my real name, in order to pressure him to reconsider, and I only deleted the blog after he refused.

“We do not comment on what we may or may not publish in the future,” responded Danielle Rhoades Ha, vice president of Communications at the New York Times, in a statement sent to CoinDesk. “But when we report on newsworthy or influential figures, our goal is always to give readers all the accurate and relevant information we can.”

• Blockchain Bites: Digital Dollars, Ethereum’s Gas and ASX’s Blockchain ‘Lacks Clarity’
• Blockchain Bites: EY’s Auditing Slip and Bitcoin’s Long Line of Pseudonymous Developers

The Internal Revenue Service (IRS) is laying the groundwork for a possible assault on privacy-enhancing cryptocurrency technologies.

• IRS-CI Cyber Crimes Unit challenged its “industry partners” to explain where the crypto tracing community stands on privacy coins, Layer 2 protocols, sidechains and the Schnorr signature algorithm in a June 30 Request for Information (RFI), as first reported by The Block.
• “There are few investigative resources for tracing transactions” that move across these privacy-enhancing vectors, the IRS said, noting a recent spike in illicit privacy coin use. “The CI Cyber Crimes program is working to get in front of this trend.”
• The IRS singled out the monero, zcash, dash, grin, komodo, verge and horizen privacy coins, sidechains Plasma and OmiseGo, and Layer 2 protocol networks Lightning, Raiden and Celer.
• What’s good for user privacy is bad for investigative efficacy: The IRS bemoaned the Bitcoin blockchain’s apparent plans to integrate Schnorr signatures, writing that such a move will undercut IRS agents’ current tracing techniques. 
• The tax agency seeks estimates of how much it would cost to “support this initiative” as well as return on investment estimates.

• Bug in Moscow’s Blockchain Polling System Can Reveal How Users Voted: Report
• ‘I Failed Terribly at Keeping My Identity Secret’: Scott Alexander on the Value of Pseudonymity
• Cryptography Startup Brings Private Payment Channels to Tezos Blockchain
• Facebook, IoTeX, R3 Among New Members of Confidential Computing Consortium

As Chinese police step up efforts to crack down on illegal economic activities, crypto over-the-counter (OTC) traders are being detained to assist investigations. 

In another sign Chinese law enforcement are targeting cryptocurrency trading, Zhao Dong – a prominent Chinese crypto OTC trader and the co-founder of crypto lending platform RenrenBit – has been held up by police in the city of Hangzhou. A rumor that Zhao had been taken away first emerged on WeChat on Thursday, after a screen capture describing his detention began circulating within the local community and was later reported by local news outlets.

As the rumor drew wider attention given Zhao’s prominent status, a representative of RenrenBit said in a statement on the social media platform Weibo that one unnamed OTC trading desk in Beijing had its whole team taken away by police late last month. It does not appear that any of the OTC traders were outright arrested.

Related: How Chainlink and Cosmos Fit Into China’s Grand Blockchain Initiative

RenrenBit said Zhao, who has invested in the OTC team but was not involved in day-to-day trades, returned to China from Japan in early June and is now “actively” assisting local police in anti-fraud and anti-money laundering investigations.

In 2017, the Chinese government prohibited local crypto exchanges from allowing trades between cryptocurrency and Chinese yuan. Many traders turned to OTC platforms as a result, which essentially enable peer-to-peer trading by connecting buyers and sellers. Individual users in China have been relying on OTC desks to buy or sell USDT or bitcoin with Chinese yuan to participate in crypto-to-crypto trading. 

A person with direct knowledge of the issue, requesting anonymity due to the sensitivity of the case, told CoinDesk that Zhao is currently being held by police but added this is systematic effort, not an isolated incident. The issue has also sparked some fear among other OTC desks in China, the person said.

The person said law enforcement agencies across Chinese provinces have increased their scrutiny over crypto OTC desks since mid-June, and have taken away more than one trading desk to assist on investigations related to money-laundering activities. But the news about Zhao has drawn wider attention since he is well-known as one of the largest OTC traders in China, and has been a member of China’s crypto community since 2013.

Related: Bitcoin Miner Maker Ebang Estimates $2.5M Loss for Q1 in IPO Prospectus Update

Read more: Chinese Police Freezing OTC Traders’ Bank Accounts Over ‘Tainted’ Crypto Transactions

Although the recent investigations do not necessarily suggest buying or selling cryptocurrency through OTC is illegal, a more systematic target could have a larger ripple effect on OTC desk operations in China, which remain a significant part of local crypto trade.

The latest action by Chinese police follows a wide bank account freeze reported in early June, where more than 1,000 people were estimated to have been affected. At the time, a wide range of OTC desks and users in China had their bank accounts frozen by law enforcement after being suspected of either knowingly or unknowingly facilitating illegal activity, such as telecom frauds or ponzi schemes, to launder proceeds via crypto OTC trading. 

Cryptocurrencies, especially the dollar-pegged USDT, have been a popular method for Ponzi schemes or fraud organizers to launder money in China, which would then contaminate the fiat money and cryptocurrencies that are circulating in the Chinese OTC market. 

Law enforcement’s investigations of these illegal schemes are a way to track the flow of contaminated fiat money and crypto assets. Users or OTC desks who even unknowingly touch these questionable assets might have their bank accounts frozen. 

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Lightning developer and Zap, Inc. founder Jack Mallers announced Thursday his startup’s Strike product, which allows people to receive bitcoin as dollars via direct bank deposits, is finally entering public beta.

A Visa card is also in the works.

“Zap, Inc. has joined Visa’s Fast Track program,” Mallers said in an email about the startup’s plan for 2020. “Visa works with members of the Fast Track program to help them go to market in the most efficient way possible, providing them support and resources every step of the way.” 

Related: After Years of Resistance, BitPay Adopts SegWit for Cheaper Bitcoin Transactions

He said his primary focus this year is launching a Strike card for consumer app users and integrating Visa Direct into the consumer app, which is the program that makes Venmo payments so fast. There’s no date yet for the upcoming Strike card. 

“They [Visa] are a partner for our consumer issuance offering and are not involved in our merchant offering at all,” Mallers added.

This year Visa appears to be doubling down on partnerships with crypto companies. For example, the shopping rewards app Fold (also a Fast Track member) and the exchange Coinbase both also offer corresponding Visa cards. These are generally used by crypto advocates who prefer to earn crypto rewards rather than other types of points. There are also crypto debit cards, which allow people to spend dollars. It remains to be seen what specific options will be available to Zap cardholders in 2020. 

Visa confirmed the deal but did not offer any additional comment by press time. 

Related: Why Bitcoin Bulls Are Betting on Explosive Growth in India

Although Jack Dorsey’s Cash App and the exchange unicorn Coinbase are widely considered the most mainstream apps for buying and selling bitcoin, Mallers is looking to offer an app of the same caliber, at a fraction of the cost.

Mallers said his two-year-old startup, with several people on staff, will take a three-pronged approach to the recession. To start, Strike gives each user a unique, public website where people can send bitcoin just by scanning a QR code. This is comparable to what the Ethereum Name Service offers with .ETH public wallet addresses. 

Read more: Zap’s New Product Lets Merchants Take Dollars Over Lightning Network

However, Zap’s Strike is not a crypto wallet. Instead, the startup does an exchange on the backend and sends dollars to the user’s account. 

“Traditional tax rules would apply to the financial transaction, and the exchange would bear the taxable cost of the bitcoin sale, not the individual,” attorney Sasha Hodder of DLT Law Group said in an interview, describing one potential benefit of Strike’s setup. 

Anyone around the world can now anonymously send bitcoin to people with American bank accounts or credit cards. 

Strike offers a public identifier that is not associated with one’s personal bitcoin address. Instead, the startup manages these wallet addresses. This means someone can pay content creators, for example, without revealing personal information to each other. 

So far, the Strike setup is mostly used by small businesses and their customers. One such user, a coder and U.S. Army veteran named Rick in Colorado, uses Strike to purchase medicine to help with his seizures. Another user, who goes by Tyler, buys gift cards with Strike.

“It’s very responsive, there’s never lag time or anything like that. It’s like Twitter or something,” Rick said in a phone interview, describing how intuitive Strike was.

The startup offers two different services, the merchant offering for businesses, and the free mobile app for consumers. For users who prefer to receive bitcoin, they can use Zap’s namesake product, a Lightning-friendly bitcoin wallet. The Zap wallet offers self-custody for bitcoin while the custodial Strike wallet can only receive value in fiat.

Zap now offers two complementary wallet apps, plus it has a third trick up its sleeve. 

Attorney Lisa Zarlenga of Steptoe & Johnson LLP said custodial services like Strike may reduce the hurdles for both shoppers and merchants during the economic lull by taking on “the burden” of channel management and reporting because “the person transferring the bitcoin has to keep track of the value.”

Bitcoin advocates often claim they would like to use bitcoin, especially with Lightning transactions, to anonymously pay for products and services like media content. There are e-commerce vendors that accept bitcoin, although few shoppers use these options. Now it’s possible for creators and merchants with almost any technical skill level. Beyond computer literacy, the tax requirements are another major hurdle that bitcoin users might face. 

Read more: The COVID-19 E-Commerce Boom Hasn’t Trickled Down to Bitcoin, Despite Advantages

Over the past three years, the nonprofit Coin Center repeatedly proposed changing the tax regulations to reduce paperwork requirements for small purchases made directly with crypto, but Hodder said lawmakers aren’t prioritizing such tax issues during the COVID-19 crisis. 

Omri Marian, a professor of law at the University of California, Irvine, pointed out that most exchange services like Coinbase “would calculate your taxable income” anyway, so Strike may not solve any “administrative issue” for some users. 

“Why not just pay in dollars?” Marian asked. 

Someone can easily pay rent or buy groceries with value derived from bitcoin, using these free apps and a Visa card. The question remains whether bitcoiners will use the system enough to fuel the startup’s behind-the-scenes exchange earnings. If so, Zap doesn’t need to become a unicorn in order to make a healthy profit. 

Read more: Lightning Wallet Zap Launches in-App OTC Desk for Bitcoin Buyers

Strike user Tyler said he hopes the service will “allow merchants to accept and use bitcoin with Lightning without their customers knowing or spending bitcoin.”

“This app allows me to interface with Lightning so easily,” Tyler said, noting how the scaling solution operates quietly in the background.  

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A vulnerability in a blockchain-based system used in Russia’s recent poll meant users’ votes could be decrypted, journalists found.

On Wednesday, the final day of a vote on constitutional amendments, Russian media outlet Meduza published research showing the keys for decrypting votes could be retrieved using the HTML code of the electronic ballot. 

Over the past week, the country has voted to approve or reject changes to Russia’s constitution, the most striking of which eliminated the two-term restriction for presidents in office, effectively allowing Vladimir Putin to run for reelection until 2036.

Related: ‘I Failed Terribly at Keeping My Identity Secret’: Scott Alexander on the Value of Pseudonymity

In two parts of the country, Moscow and the region of Nizhny Novgorod, people had an option to vote electronically. Their votes were recorded on Exonum-based blockchain system created by Moscow’s Department of Information Technologies with the help of Kaspersky Lab. 

According to Meduza’s findings, votes had been encrypted using the TweetNaCl.js cryptographic library. This provides a deterministic algorithm, meaning that with similar input data, the system generates the same cryptographic key, which is used for both encoding and decoding the vote. 

As such, Meduza said it was able to find the two keys that were universally used to encode the “yes” and “no” votes. This allowed its team to decode the voting data, which was being published in CSV files by the Department of Information Technologies as the voting proceeded. 

See also: Hacker Attempts to Disrupt Russia’s Blockchain Voting System

Related: Cryptography Startup Brings Private Payment Channels to Tezos Blockchain

Such transparency was intended to help independent observers to check the correctness of the vote count, but can also be used to check how particular people voted – bringing the threat that they may be pressured to vote a certain way in future polls, Meduza wrote.

The BBC has previously reported that city-owned companies in Moscow had been forcing their employees to register for electronic voting and even share credentials for their accounts with supervisors. 

The Department of Information Technologies’ representative Artyom Kostyrko commented on Meduza’s report Wednesday, saying people can only decode their own votes on their own devices. That contradicted Meduza’s report, which said it’s possible to decode any vote using the same cryptographic keys. 

The department’s press office did not respond to CoinDesk’s request for comment by press time.

Kaspersky Lab’s press representative, Olga Bogolyubskay, told CoinDesk the company has nothing to add to the official comment by the department, but did say it has been providing “expert support to the Moscow Department of Information Technology,” along with other companies. 

See also: Russia’s Ministry of Justice Latest to Criticize Proposed Crypto Ban

“We have expertise and significant experience in ensuring the security and transparency of mass online voting using blockchain technologies through our Polys platform,” Bogolyubskay added.

Meduza’s report is just the latest security concern with the voting system. The Department of Information Technologies reported Friday an “observation node” had been attacked while the constitutional vote was underway. However, according to independent elections observers in Russia, there is no technical way to connect to the blockchain from the outside, as it ran entirely on the department’s servers.

• Hacker Attempts to Disrupt Russia’s Blockchain Voting System
• Facebook, IoTeX, R3 Among New Members of Confidential Computing Consortium

Norwegian cryptocurrency investment firm Arcane Crypto is planning to list on Nasdaq Nordic’s alternative stock exchange through a reverse takeover.

• On paper, Arcane will be fully acquired by Swedish firm Vertical Ventures – which is listed on Nasdaq First North – for just under SEK 300 million (~$32 million).
• However, Arcane will be the majority owners of Vertical Ventures, which will trade under the Arcane name.
• To fund the $32 million takeover, Vertical Ventures will issue more than 6.6 billion new shares – each at half a U.S. cent.
• In November, Arcane tapped Eric Wall, blockchain lead at Cinnober, which was acquired by Nasdaq in 2018, as its new CIO.
• Arcane CEO Torbjorn Bull Jenssen said that if the listing is successful, the firm would appeal to a wider investor base.
• The latest deal will have to be approved by shareholders; Nasdaq North will also have to sign off on the new company structure before it can be re-listed.
• Vertical Ventures’ shares have jumped on the news, and are up 53% since the market open.
• Both sides are now performing due diligence, with the takeover expected to be completed in the second half of this year 2020.

EDIT (July 2, 13:40 UTC): A previous version of this article stated Arcane was a fund and that it had signed an LOI with Tongdow E-Commerce, this has now been corrected.

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• Nasdaq, Morgan Stanley Trading Vets Build Startup to Unite Crypto Market Price Ranges

Norwegian cryptocurrency investment fund Arcane Crypto is planning to list on Nasdaq Nordic’s alternative stock exchange through a reverse takeover.

• On paper, Arcane will be fully acquired by Swedish firm Vertical Ventures – which is listed on Nasdaq First North – for just under SEK 300 million (~$32 million).
• However, Arcane will be the majority owners of Vertical Ventures, which will trade under the Arcane name.
• To fund the $32 million takeover, Vertical Ventures will issue more than 6.6 billion new shares – each at half a U.S. cent.
• In November, Arcane tapped Eric Wall, blockchain lead at Cinnober, which was acquired by Nasdaq in 2018, as its new CIO.
• Arcane CEO Torbjorn Bull Jenssen said that if the listing is successful, the firm would appeal to a wider investor base.
• The latest deal will have to be approved by shareholders; Nasdaq North will also have to sign off on the new company structure before it can be re-listed.
• Vertical Ventures’ shares have jumped on the news, and are up 53% since the market open.
• Both sides are now performing due diligence, with the takeover expected to be completed in the second half of this year 2020.

EDIT (July 2, 13:40 UTC): A previous version of this article stated Arcane had signed an LOI with Tongdow E-Commerce, this has now been corrected.

• Nasdaq Is Using R3’s Corda for Managing Digital Assets
• SEC Seeks More Feedback on tZERO’s Proposed Security Token Exchange
• Diginex Steps Closer to Backdoor Nasdaq Listing as SEC Approves Merger
• Nasdaq, Morgan Stanley Trading Vets Build Startup to Unite Crypto Market Price Ranges