CoinDesk Crypto

Wasabi Wallet users need to upgrade to the latest version if they want to continue using the CoinJoin feature to keep their Bitcoin transaction histories private.

That’s because those running older iterations of the wallet can no longer use this feature to mix their coins with users who have the newest version.

The Wasabi Wallet team hard-forked the wallet Thursday to address a vulnerability discovered by a team member at Trezor, a leading maker of hardware wallets. A hard fork is a code change that makes older versions of a software incompatible with newer ones.

Related: Wasabi Wallet Is Revamping Its CoinJoin Design to Allow Bitcoin Mixing With Differing Values

The flaw’s discovery is another example of the open-source community’s camaraderie and cooperation. Developers are constantly tinkering to improve their peers’ software, and many vulnerabilities have been responsibly disclosed during these processes to patch flaws before they can be exploited by bad actors. (Sometimes, however, the disclosures by rival teams are less-than-cordial, as evidenced by the long-running tensions between Wasabi and rival Samourai Wallet.)

Read more: Hardware Wallet Flaw Lets Attackers Hold Crypto for Ransom Without Touching Device

According to a Wasabi Wallet blog post, Trezor hardware wallet developer Ondřej Vejpustek responsibly disclosed the potential denial-of-service (DoS) attack to the Wasabi team on May 10 (a DoS attack entails an attacker spamming a network or protocol with the hopes of stymying its operations, hence “denial of service”).

“Vejpustek has been very cooperative since the beginning and left us total freedom on how to manage the disclosure, both in terms of time and communication. This demonstrates the importance of proper communication between security researchers and dev teams. This is how a responsible disclosure should be,” Wasabi Wallet contributor and marketing strategist Riccardo Masutti told CoinDesk, adding that Vejpustek was paid a bitcoin bounty for his efforts.

Related: Twitter Hacker Is Mixing Bitcoin Loot Using a Wasabi Wallet, Elliptic Says

This hypothetical DoS attack, which Wasabi Wallet assumes has never been carried out, would have interfered with the wallet’s implementation of CoinJoin, a privacy protocol that allows users to mix their bitcoin with others’ to obscure the coins’ transaction histories.

Wasabi Wallet’s CoinJoin implementation requires each participant to take out as much as they put in. If, for instance, 10 participants join a mix for 0.1 BTC, then each user must send exactly that amount (plus a miner fee) and must receive that exact amount for the mix to be successful and to retain CoinJoin’s privacy protections. Mixing coins makes it harder for blockchain snoops and nosy parkers to pin bitcoin transactions to known addresses and their owners’ identities.

Read more: Wasabi Wallet Is Revamping Its CoinJoin Design to Allow Bitcoin Mixing With Differing Values

The disclosed DoS vulnerability would have halted the mixing process. The attacker would register bitcoin for a mix without that bitcoin being signed (verified) by the mix’s coordinator, while at the same time submitting a real, verified transaction to the mix.

The result would be an incongruity between the total value of inputs made to the CoinJoin and the value of expected outputs. As a result, the coordinator would unwittingly “build a transaction that can’t be valid, since the sum of all inputs is less than the sum of all outputs,” according to Vejpustek’s analysis.

If the attack were pulled off, it would foil the CoinJoin, though it would not have given the attacker the ability to steal any coins nor could they deanonymize any peers in the mix.

Wasabi Wallet patched the fix with the hard fork deployed Thursday. This upgrade was applied to v.1.1.12 of the wallet, which was released on Aug. 5.

Related Stories

• CoinSwap and the Ongoing Effort to Make Bitcoin Privacy ‘Invisible’
• Summer 2020 Is Funding Season for Open-Source Bitcoin Development

Bitcoin prices tumbled 6.2% Thursday, falling below $11,000 for the first time in a month.

The price drop trimmed the largest cryptocurrency’s 2020 rally to 50% and sent digital-asset market traders and analysts scrambling to explain the sell-off.

Here are three reasons cited by analysts:

1. Bitcoin slid in sync with traditional markets

Related: DeFi Degens Are Crypto’s Suicide Squad

The Standard & Poor’s 500 Index of large U.S. stocks retreated Thursday after climbing to a new record high earlier in the week. A report showing new U.S. jobless claims at 881,000 in the final week of August was better than feared – and the lowest since the pandemic hit earlier this year – but still well above the 665,000 level that marked the high point of the last recession in early 2009. Pantheon Macroeconomics called the figure “still grim,” while Navy Federal Credit Union economist Robert Frick said the labor market was “continuing to struggle, and not showing improvement despite COVID-19 levels that declined in August.

John Todaro, director of institutional research at the cryptocurrency analysis firm TradeBlock, said:

“There could be an overlap between equity sellers and digital currency sellers. The largest equity market decliners this morning are tech stocks, including retail trading darlings, Tesla and the FAANG names [Facebook, Amazon, Apple, Netflix and Alphabet, once Google]. It is unclear if this will push into a continued broader crash in equity markets, which could put more pressure on digital currencies, or if it is just a short-term correction.” 

2. Bitcoin got pulled down because of DeFi unwinding

Traders have been getting out of the recent speculative fervor in decentralized finance, or DeFi, much of which takes place on Ethereum, the second-largest blockchain. Prices for ether, the native currency of the Ethereum blockchain, tumbled 8.3% on Thursday after a 7.6% drop the prior day. Yet those price drops followed gains of 54% in July and 25% in August amid reports of eye-popping dollar amounts flowing into DeFi – especially with recently-launched projects like Compound, Yearn.Finance and SushiSwap – attracting attention from traders to the fast-growing and lucrative-but-risky pursuit of “yield farming.” Total value locked in DeFi more than doubled in August to $9.5 billion, but in the past few days the amount has shrunk to $9.1 billion, according to the website DeFi Pulse.

Related: DeFi Risk Management Startup Cozy Finance Debuts With $2M Funding Round

Denis Vinokourov, head of research at the crypto prime broker BeQuant, told CoinDesk in an email: “The explosive growth that decentralized exchanges (DEXs) and all things DeFi has finally reached levels that begin to impact on the sentiment across its centralized exchange (CEX) counterparts, with the sell-off triggered by a combination of stratospheric Ethereum fees. Also, an aggressive unwind of the very crowded trade across Uniswap token related positions in the wake of a number of tokens, namely PIZZA and HOTDOG, dramatically collapsed from $6,000 to $1 in a mere few hours. This is likely because the same assets (bitcoin, ether and others) are used aggressively to structure collateralized positions. Similarly to another DeFi heartthrob SushiSwap, these offerings were also Uniswap clones. DEX and DeFi trading is no longer a hobbyist activity and a number of firms that dominated CEX space have recently ventured out into DeFi to generate alpha. As such the Chinese wall that once separated markets is no longer in place and sentiment from one market will flow into another, and vice versa.”

3. Miners sold some of their bitcoin

Bitcoin miners and possibly traders decided to take risk off the table by trading in some of their cryptocurrency, which they receive as rewards for helping to maintain the security of the blockchain network. CoinDesk reported prior to Thursday’s sell-off that blockchain data were showing elevated transfers of bitcoin to exchange wallets, typically seen as a precursor of heightened selling pressure. According to CryptoQuant, a blockchain-data analysis firm, tracking of major bitcoin-mining pools showed an increase in bitcoin being transferred out – ostensibly also to exchanges for a possible sale.

Ki Young Yu, founder of CryptoQuant, told CoinDesk in a Telegram chat: “Miners are good traders. I think they are just looking for selling opportunities, not capitulation. I think it’s going to be the war of miners between those who want a bitcoin price rally and those who don’t. Some Chinese miners already realize their mining profitability (ROI), and they might not want new mining competitors joining the industry because of the bull market.”

Related Stories

• Buterin, Ethereum Developers Focus on Congestion as Fees Spike Over 600% in 1 Month
• First Mover: As Bitcoin Falls for Second Day, Long-Term Holders Probably Won’t Care

The Russian Ministry of Finance has drawn up a new draft bill that echoes a previous attempt to outlaw cryptocurrency use and, if passed, would have a major impact on the nation’s crypto miners.

The document, sent by the ministry to other government branches for feedback, states that miners located in Russia and using Russia-based infrastructure may not be rewarded for their work in cryptocurrency, according to the Russian newspaper Izvestia, which first reported the bill.

The draft is intended to amend a new law on digital assets signed by Russian President Vladimir Putin at the end of July.

Blow for miners

Related: Robinhood May Face $10M SEC Fine Over Disclosure Failures

If the bill becomes a law, it might push individual miners outside of lawful operations, says Igor Runets, CEO of BitRiver, one of the largest mining farms in Russia. “They receive crypto as a reward [for recording transactions on the blockchain], and this becomes illegal,” Runets said.

A way around this issue would be for a miner or mining farm to establish a foreign entity through which to conduct its finances, Runets suggested. However, the process isn’t cheap, and wouldn’t be an option for small miners that can’t afford the legal costs.

Read more: Russia’s Crypto Mining Farms Would Have to Report to Government Under Proposed Bill

The draft bill, obtained by CoinDesk (see below), states that the “actions allowing third parties to use digital currency, creation of software and hardware for issuance of the digital currency and transactions with it in the computer systems created by the foreign laws,” are “not forbidden.” However, accepting digital assets as a payment for such work would be outlawed.

Related: Russia’s New Blockchain Voting System Isn’t Ready, but It’ll Be Used This Month Anyway

The new rules could affect facilities in Russia that host clients’ mining devices and get paid in cryptocurrency for the electricity and services they provide.

According to Jakhon Khabilov, head of the Sigmapool mining pool, currently only smaller mining farms in Russia accept crypto as payment, while larger ones are paid in fiat currency via bank transfers.

Prison threat

The bill includes stipulations from a previous draft, introduced into the Russian parliament but abandoned after a public outcry. Both state that Russian citizens can only possess crypto assets if they inherit them, receive them as debtors of a bankrupt company or receive them as compensation after winning a lawsuit.

Read more: Russia Is Blocking Bitcoin-Related Websites Again

The new draft also carries over the proposal that illegal issuance and usage of cryptocurrency, and accepting it as a means of payment, should be punished with fines of up to 1 million Russian rubles (about $13,240) or up to seven years in prison.

These measures were introduced in May but met strong criticism from the Russian crypto community as well as from the country’s Ministry of Justice and Ministry of Economic Development. The draft did not become a part of the law that was signed by Putin in July.

See the full draft bill (Russian language) below:

Related Stories

• Russia’s Crypto Mining Farms Would Have to Report to Government Under Proposed Bill
• Crypto Long & Short: What Changes at the Fed and the SEC Mean for Crypto

Saudi Arabian business leaders think they have a solution to trade finance woes caused by COVID-19: a blockchain-based business passport to cut through red tape.

• This “Global Value Chain” (GVC) passport would allow firms already following their host country’s financial rulebook to tout their credentials elsewhere, easing trade and increasing financial access globally, according to the Saudis’ Wednesday proposal before a group of G20 business leaders, developed in partnership with the OECD.
• Blockchain technology would provide the GVC Passport a distributed, trusted, real-time source for global regulators to verify business’ accreditation claims, according to the Saudis’ accompanying white paper.
• The result: a more efficient financial system with firms – especially small and midsize ones that normally lack a global presence –  cut free from repetitive, redundant, cross-border regulatory burdens, the Saudis said.
• “SMEs represent 90% of businesses and 50% of employment worldwide, and therefore hugely impacted by the events of the past nine months. Adoption of this policy initiative will help SMEs in the recovery phase,” said B20 Chair Yousef Al-Benyan in a press statement.
• Saudis pitched their GVC Passport to global business leaders at a Wednesday B20 summit. They noted that it is a long-term proposal only possible with close international support, so they asked the business community and the G20 to get on board.

Related Stories

• Stacks Foundation to Spend ‘Majority’ of STX Token Fortune on Ecosystem Development
• Bank of England Governor Wants Global Regulations as Stablecoins Pick Up Steam
• Jump Trading Invests in Decentralized Exchange Serum, Signs On as Market Maker
• Swiss Canton Zug to Accept Taxes in Bitcoin, Ether From Next Year

Pornhub will accept BTC and LTC payments, a nonprofit is calling upon Coinbase to be more transparent and credit default swaps are coming to the Ethereum blockchain. 

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. 

Top shelf

Porn payments
Pornhub, the popular adult entertainment site, has added bitcoin (BTC) and litecoin (LTC) payment options for its Pornhub Premium product. The company is an example of legal, though untraditional, online businesses struggling with centralized payment processors: PayPal has blocked payments to the site without explanation, CoinDesk’s EU News Editor Daniel Palmer reports. The company has accepted verge (XVG) since 2018, and has recently added support for dollar-linked stablecoin tether (USDT). 

Related: First Mover: As Bitcoin Falls for Second Day, Long-Term Holders Probably Won’t Care

Crypto for taxes
People and businesses in the Swiss canton of Zug, home to “Crypto Valley,” will be able to pay their taxes in bitcoin (BTC) or ether (ETH) beginning next February. Authorities have partnered with the Zug-based crypto broker and custodian Bitcoin Suisse, which will convert cryptocurrency payments into Swiss francs and hand them over to the tax office. The canton will accept tax payments up to 100,000 CHF (around $109,000) in those cryptos, though no partial payment will be accepted. In a statement Thursday, Zug Finance Director Heinz Tannler said the move would help to normalize the use of cryptocurrencies in everyday life.

Another Twitter hack
Prime Minister Narendra Modi of India has become the latest victim of a Twitter hack meant to siphon cryptocurrency from unsuspecting users. A Twitter account of Modi’s personal website known as the Prime Minister’s National Relief Fund (PMNRF) was hacked and began soliciting 2.5 million followers to donate to the relief fund using cryptocurrency, the Nikkei Asian Review reported and Twitter confirmed. The social media giant is “not aware of additional accounts being impacted,” a Twitter representative said. Modi’s hack follows a high-profile breach that compromised several accounts, including those of U.S. Democratic Presidential nominee Joe Biden, Tesla’s Elon Musk, Kanye West and CoinDesk. The alleged perpetrators of that attack have been apprehended.

Full disclosure
The Electronic Frontier Foundation (EFF) is calling upon Coinbase to release regular transparency reports related to the government and law enforcement requests for information it receives. In a Wednesday blog post, the digital advocacy nonprofit said financial data is one of the “most sensitive types of information” a user produces. The way Coinbase responds to government requests could “have a huge impact on what types of speech thrive online,” CoinDesk’s Sebastian Sinclair reports. In June, Coinbase initiated procurement deals with the Drug Enforcement Administration and the Internal Revenue Service (IRS), for its investigations tool called “Coinbase Analytics,” which traces transactions conducted across the exchange ecosystem. 

COVID-19 relief
The Congressional Blockchain Caucus is urging President Donald Trump and other federal officials to adopt blockchain solutions to boost COVID-19 relief efforts. In a Wednesday letter, lawmakers said blockchain technology can help identify and authenticate individuals set to receive government benefits, streamline supply chains and create a registry of medical professionals. They further cited blockchain’s strong encryption mechanism that protects sensitive data. The U.S. government’s response to a pandemic has been a case study in governmental inefficiency, with states duking it out over critical supplies. Last April, 11 representatives signed a letter calling on the U.S Treasury Department to consider blockchain and distributed ledger technologies (DLT) in streamlining the distribution of stimulus funds to citizens across the nation.

Quick bites

• Self-Help Firm That Mostly Took Bitcoin as Payment Mostly Just Helped Itself, SEC Charges (Danny Nelson/CoinDesk)
• Robinhood May Face $10M SEC Fine Over Disclosure Failures (Paddy Baker/CoinDesk)
• CFTC Greenlights LedgerX Request to Move Beyond Digital Currency Products (Jaspreet Kalra/CoinDesk)
• Hayden Adams details how Uniswap aims to fend off the DEX competition (Frank Chaparro/The Block)
• US Air Force Spends $800,000 on Chainalysis’s Crypto Services (Scott Chipolina/Decrypt)

At stake

Related: Blockchain Bites: How SushiSwap Drove Uniswap to DeFi’s Top Spot

Tether financialization
Credit default swaps (CDS), known for their role in the 2008 recession, have come to the Ethereum blockchain. Derivatives exchange Opium has introduced CDS for the dollar-linked stablecoin tether (USDT), providing insurance to buyers in case Tether, the issuer of the stablecoin, defaults. 

Tether, a key component of the crypto marketplace and fifth largest cryptocurrency by market capitalization, claims a 1-to-1 backing with U.S. dollars. This is often contested.

Tether revealed in April 2019 that only 74% of USDT was backed by “cash and cash equivalents.” The firm later said USDT was once again fully backed in a November 2019 retort to an academic paper that blamed the stablecoin for the 2017 bitcoin bubble. 

Further, the firm behind the stablecoin is under investigation by the New York Attorney General’s office for alleged misappropriation of funds.

Opium’s CDS product finally lets the controversial crypto’s critics and defenders “put their money where their mouths are,” CoinDesk’s Will Foxley reports. 

A CDS is a “transfer of the insurance from people who know and are confident to people who’d like to be insured. Derivatives are just about transferring the risk. Some people would like to have the risk and get paid, some people would like to pay to get rid of risk,” Opium founder Andrey Belyakov said.

The new CDS tethered to USDT can be customized to pay out under different scenarios, such as the stablecoin falling under a preset value, said Aave founder Stani Kulechov, who is advising Opium.

In this case, a sharp drop in USDT’s price from the usual $1 is used as a proxy for Tether turning out to be insolvent. So if the token fell to 70 cents, the writer of the contract would pay the buyer 30 cents at maturity.

Investors don’t need to hold USDT to purchase this coverage. They can use CDS to bet against the asset, while those who trust Tether to honor its obligations can earn a premium for standing ready to cover defaults.

Paolo Ardoino, chief technology officer at Tether, said through a spokesman: “Tether is solvent. Therefore, this solution is not really interesting to us or our community.”

Market intel

Steep pullback
Bitcoin (BTC) pulled back about $403 to $10,838 early Thursday, deepening a two-day sell-off that pushed the largest cryptocurrency to its lowest point in a month. CoinDesk’s Omkar Godbole previously reported an influx of 92,000 BTC on Wednesday – the biggest-single day rise in 37 days – could deepen bitcoin’s descent. “Inflows surged as people rushed to sell at near $12,000,” Philip Gradwell, chief economist at Chainalysis, tweeted early Thursday. There’s evidence exchanges have not fully absorbed this selloff, hinting at a lack of buyers, which could lead to a profound drop in price. 

Ether options
Ether option contracts listed on Deribit, the largest crypto options exchange, rose to a record high of $507 million on Tuesday. This is possibly due to yield farming, the act of putting crypto holdings to work on decentralized applications to earn more crypto, Godbole reports. Open positions in ether options have surged by 45% from $349 million to $507 million over the past five days and nearly doubled since the end of July, while the total value locked (TVL) in the DeFi applications has surged by over 20% to $8.65 billion in the past five days. 

Tech pod

Hypothetical attack
A recently disclosed vulnerability in popular Trezor and KeepKey hardware wallets would have allowed attackers to hold users’ cryptocurrency for ransom without going anywhere near the device, CoinDesk’s Colin Harper reports. ShiftCrypto, the Swiss company that manufactures the BitBox hardware wallet, has disclosed a potential man-in-the middle ransom attack vector that leverages the two wallet’s optional passphrase feature users can use to unlock their device in lieu of a PIN. Trezor has issued a patch, KeepKey has delayed taking action, though it has not been suggested the hypothetical attack has been carried out. 

Op-ed

DeFi, meet CeFi.
Author of “The Business Blockchain,” William Mougayar thinks centralized finance and decentralized finance should link up for each other’s benefit. “CeFi” will bring users and expertise to DeFi – which will struggle to grow beyond its pen of hardcore users – but must begin thinking like wholesalers and hurry to “pick the DeFi products they want to build on top of,” he writes. “The CeFi market potential is staring DeFi in the face. If CeFi exchanges want to start looking more like full-service financial services institutions, they need to become DeFi’s best distribution channels.”

Podcast corner

Policy shift?
Luke Gromen, founder of the Forest for the Trees consulting firm, joins The Breakdown to discuss his thoughts on Jerome Powell’s Jackson Hole address last week. Is this really a change in policy?

Who won #CryptoTwitter? Related Stories

• First Mover: Bitcoin Tumbles, Bithumb Reportedly Raided, Uniswap Challenges Coinbase
• Blockchain Bites: Patoshi’s Patterns, Canaan’s Losses, DeFi’s ‘Weird’ Moment

A group of VC heavyweights and crypto entrepreneurs, including Blockfolio founder Ed Moncada, are backing a new risk management tool for the exploding decentralized finance (DeFi) space.

Announced Thursday, Cozy Finance has raised a $2 million seed round, led by Electric Capital and including Variant Fund, Dragonfly Capital, Robot Ventures, Slow Ventures, Volt Capital, Spencer Noon, Moncada and others.

The team attempting to bring some order to the creative chaos that is DeFi consists of Cozy co-founders Tony Sheng, formerly of Multicoin Capital, and Payom Dousti, co-founder of Rare Bits, a peer-to-peer marketplace for crypto goods.

Related: DeFi Degens Are Crypto’s Suicide Squad

The value of assets deposited in Ethereum-based DeFi dapps has soared from $1 billion to over $8 billion in the span of six months. Developers have unlocked massive value for crypto investors by creating useful ways for them to manage their assets. However, these users face new forms of risk, like irreversible technical vulnerabilities.

See also: Retail Trading Platforms Pile Into $5M Funding Round for Zero Hash Crypto Settlements Firm

“As DeFi has grown, a clear and important hole are tools for people to be able to manage their risk appropriately,” Electric Capital co-founder Avichal Garg told CoinDesk. “Tony and Payom have deep experience in crypto and novel ideas on how to build risk management tools. We are thrilled to be working with them.”

DeFi hedging options

At the current moment, the transformative potential of DeFi is being hindered by a lack of appropriate risk management tools, the firms said in a Medium post.

Related: 3 Reasons Bitcoin Just Tanked Below $11K for First Time in a Month

“Today, the most common method of managing risk is ‘position sizing’ – even the most active users and funds aren’t deploying as much capital into the ecosystem as they’d like to,” Sheng told CoinDesk via email. “Part of this is that demand for risk management tools currently outstrips supply. The other part is that we have yet to see a truly ‘DeFi native’ ways to manage the risk.”

Other players trying to make DeFi safer include London-based Nexus Mutual, which runs a decentralized risk pool designed to hedge against DeFi smart contracts blowing up – something which appears more and more to be an acceptable risk of late.

But Sheng disagreed that blow-ups are simply part and parcel of the nascent DeFi economy. 

“I don’t think anybody believes we should learn by making mistakes with user deposits,” he said. “Major blow-ups set the entire industry back. Better risk management is a key enabler of more experimentation.”

See also: SPiCE Takes Tokenized Blockchain VC Fund to Asia in Quest for Greater Liquidity

Asked how Cozy Finance compared with risk management in traditional finance, Sheng said the unique risks of DeFi require unique solutions. 

“We’re building something that is – to our knowledge – quite new. What we plan to launch will not look like anything on the market today,” he said.

Related Stories

• For DeFi to Grow, CeFi Must Embrace It
• Blockchain Bites: How SushiSwap Drove Uniswap to DeFi’s Top Spot

The governor of the Bank of England (BoE) has said stablecoins need global regulation, warning private issuers that an international regulatory framework could soon be in the cards.

• Governor Andrew Bailey said regulators have to come together for a “global response” so they can effectively regulate stablecoins.
• Speaking Thursday, he said the international nature of stablecoins, which can be based in one country and operate in another, meant failure to coordinate could result in confusion and regulatory fragmentation.
• Bailey addressed an audience at the Hutchins Center on Fiscal & Monetary Policy of the Brookings Institution – a think tank that has called on policymakers to devise regulation for cryptocurrencies.
• In a published speech, he said: “[H]ost regulators of global stablecoins must, and are, working with other regulators in other jurisdictions to ensure that they are appropriately regulated and gaps in coverage, opportunities for regulatory arbitrage, do not emerge.”
• While Bailey recognized stablecoins could reduce frictional costs, he emphasized that private issuers had to do more to ensure users can always redeem their stablecoins 1:1 with the underlying fiat currency.
• He also warned that future stablecoin offerings may have to do more to satisfy regulatory standards at both a national and international level.
• Compared to bitcoin, which he described as wholly unsuitable for payments, he said some stablecoin proposals could become the primary means for purchasing goods and services.
• In a possible inference to Facebook’s libra coin, he said discussions about multi-asset stablecoins were currently premature.
• The BoE has previously toyed with the idea of launching a digital pound – even suggesting private companies could play a role in issuance.
• It also joined a working group with five other central banks and the Bank of International Settlements (BIS) at the start of the year.

See also: Bank of England Building Payments Network to Support a Potential Digital Pound

Related Stories

• Stacks Foundation to Spend ‘Majority’ of STX Token Fortune on Ecosystem Development
• Saudi Arabia Pitches Blockchain-Based Business Passport to Boost Trade Finance
• Jump Trading Invests in Decentralized Exchange Serum, Signs On as Market Maker
• Swiss Canton Zug to Accept Taxes in Bitcoin, Ether From Next Year

Ethereum developers are turning their focus back to the current version of the network after months of focus on the upcoming Ethereum 2.0 release to address exponential fee growth.

• The surge in fees is being driven by the explosive popularity of decentralized finance (DeFi) applications that are predominantly built on Ethereum.
• Average network fees reached $15.21 on Wednesday, up 660% from $2 a month ago. Ethereum’s median fees also spiked nearly 900% over the same period, reaching $8.95.
• Moreover, the day after CoinDesk reported about new record highs Tuesday for transaction costs, average fees climbed another 24% and median fees spiked 37 percent. 
• In a bid to ameliorate soaring fees, Ethereum co-founder Vitalik Buterin released his Ethereum Improvement Proposal (EIP) 2929 Tuesday that proposes making certain heavy contracts more expensive by a factor of three. Contracts affected would be those that update the Ethereum state, including some applications.

• This repricing proposal could break some smart contracts already operating on Ethereum, Buterin wrote. He added that developers “have had years of warning” about potential changes.
• Approving this proposal, however, requires consensus from the Ethereum community, a process that can take weeks or months. Other broad-brush scaling solutions like EIP 1559 or sharding remain on the distant horizon as well.

Read more: Ethereum Developers Consider New Fee Model as Gas Costs Climb

• For now, individual developers need to incorporate their own individual scaling solutions, said Hendrik Hofstadt, founder of staking firm Certus Oneit, in an email with CoinDesk. “I think the pain is now big enough to push the people to move quicker with L2 (layer 2) solutions,” he added.
• Tether, for example, announced its intention to explore zk-rollups for settling tether (USDT) transactions on the Ethereum blockchain Tuesday. The stablecoin’s transaction on Ethereum consumes the second largest amount of fees, just behind the wildly popular decentralized exchange Uniswap.

Related Stories

• First Mover: As Bitcoin Falls for Second Day, Long-Term Holders Probably Won’t Care
• Around the Crypto World in 15 Charts: CoinDesk Research’s August Review
• Open Positions in Deribit’s Ether Options Hit Record High Above $500M
• First Mover: Bitcoin Tumbles, Bithumb Reportedly Raided, Uniswap Challenges Coinbase

You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team and edited by Bradley Keoun, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you don’t have to. You can subscribe here.

Price Point

Bitcoin was down early Thursday to about $11,250, extending Wednesday’s sell-off and falling to its lowest price since early August. [Update: At press time prices had slumped further to around $10,850.]

The cryptocurrency tumbled 4.4% on Wednesday, the most in a month, leading to a heightened level of margin calls and position liquidations. Prices appeared to fall in sync with gold and silver prices, which tumbled as the dollar rebounded following a recent slide. 

Related: Buterin, Ethereum Developers Focus on Congestion as Fees Spike Over 600% in 1 Month

“Failure to hold at the $12,000 level has turned the milk sour,” the crypto trading firm Diginex wrote in a note to clients. “Leveraged longs have been forced to drink it.”

Market Moves

With stocks soaring to new records after a decade-long climb, traders in traditional markets are asking how much higher they can go in the midst of a global pandemic, openly discussing whether the market is just propped up by government stimulus checks and Federal Reserve money injections. 

The conversation around bitcoin is very different. The assumption among many digital-asset investors is the cryptocurrency’s price will definitely, inevitably go higher, much higher. It’s only a matter of time. 

Cameron and Tyler Winklevoss, who run the cryptocurrency exchange Gemini, wrote last week that bitcoin prices could reach $500,000, in an extensive analysis that somehow relates to a database of 600,000 asteroids. 

Related: Bitcoin Plunges $403 in 1 Hour to Lowest in a Month

Nobody really knows if any of that will pan out, of course. What’s clear is a lot of investors have bought bitcoin because they see it as a deep out-of-the-money option (with no expiration date) on financial Armageddon, severe currency debasement or at the very least an inflation rate well above the Federal Reserve’s 2% annual target. According to CoinDesk Research’s monthly review published this week, bitcoin’s price appears to be rising whenever the dollar falls in foreign-exchange markets.  

Bitcoin costs $11,200 now, and it might be possible to lose it all, but it also might be worth $500,000 at some point. That’s the general gambit anyway.  

Invented just 11 years ago, bitcoin is exceedingly difficult to value partly because it has such a short track record. Similar to gold and many other commodities, the cryptocurrency offers no yield, so bond math won’t work. Bitcoin has no earnings or dividend, so stock analysis won’t work either. 

Philip Bonello, director of research for the money manager Grayscale (owned by CoinDesk parent Digital Currency Group), says his favorite chart for thinking about bitcoin’s price trajectory might be one showing “holders” versus “speculators.” A holder in this case is defined as a bitcoin that has not moved for one to three years, while a speculator coin has moved in the past 90 days.

An increase in holders is considered “likely bullish,” while an increase in speculators is “likely bearish,” according to a recent Grayscale report. The idea is that it’s positive for the market if more investors appear to be holding the cryptocurrency for the long term, versus those who merely appear to be in it for a quick volatility ride. 

Right now, the chart shows holders increasing and speculators decreasing. According to Grayscale, it’s a “similar structure to that of early 2016,” just before bitcoin went on a bull run toward its all-time high around $20,000. 

“It’s reassuring,” Bonello said Wednesday in a phone interview, “that the sentiment of the investor base is growing day by day.” The holders appear to have been unfazed by the volatility witnessed in March, when the spread of the coronavirus quickly sent bitcoin prices swooning from above $9,000 to below $5,000. “It’s probably unlikely that they’re going to sell right now at $11,000,” Bonello said.  

All of this might mean nothing for the future price of bitcoin. It just shows that a growing number of investors are holding onto their tokens in a bet that the cryptocurrency’s price will – or even that it might – eventually go up. By a lot.  

Bitcoin Watch

• Bitcoin may extend Wednesday’s price pullback, as exchange flows indicate increased selling pressure in the market.
• While the top cryptocurrency fell by 4% on Wednesday, it defended the long-held support zone of $11,100-$11,200. [Update: At press time prices had slumped further to below $10,850.]
• The cryptocurrency may breach the support zone, as exchanges witnessed an inflow of 92,000 BTC on Wednesday – the biggest single day rise in 37 days, according to blockchain intelligence firm Chainalysis.
• “Inflows surged as people rushed to sell at near $12,000,” Philip Gradwell, chief economist at Chainalysis, tweeted early Thursday. In other words, the number of coins on exchanges, potentially poised for liquidation, increased.
• “I think there is still sell pressure to work through,” Gradwell said.
• A violation at immediate support at $11,170 would confirm a bearish reversal pattern on technical charts.

Read more: Bitcoin Risks Deeper Price Pullback as Exchange Inflows Spike

– Omkar Godbole

Token Watch

Ether (ETH): Open positions in Deribit’s ether options hit record high above $500 million.

Bitcoin Cash (BCH): Proposed changes by development team could reduce rewards for miners, splitting community support.

OKB (OKB): OKEx CEO says foundation burned 3.8 million of its utility tokens, just over 1% of total supply, deepening commitment to “deflation” at time when “central banks around the world are ceaselessly printing money.”  

Theta Network (THETA): Decentralized streaming network says DeFi could be used to pay content providers who are just starting out, with few followers.

What’s Hot

U.S. Senate Banking Committee Chair Crapo wants clear crypto rules “without stifling innovation” (CoinDesk)

Ethereum miners are cashing in on DeFi-driven gas-price hikes (CoinDesk)

Japanese crypto exchange Bitgate to offer cold storage through BitGo (CoinDesk)

Boosting Blockchain: Germany to introduce electronic securities (JDSupra)

Are bitcoin ATMs an anomaly or just an aberration? (Hacker Noon)

Analogs The latest on the economy and traditional finance

German ministry predicts V-shaped recovery in Europe’s largest economy (WSJ)

French president Macron unveils 100 billion-euro ($118B) stimulus plan (Bloomberg)

India bans 118 Chinese apps, including Tencent’s hit games, as border tensions flare (CNBC)

United Airlines to cut 16,370 workers, as company and union press for more aid (Reuters)

CEO of Calvin Klein owner: Retail sales hinge more on containing coronavirus than stimulus spending (CNBC)

Times Square Hilton hotel in New York City is set to close (Wall Street Journal)

Shopping centers from Miami to Alabama start to evict delinquent store operators (WSJ) 

Tweet of the Day Related Stories

• Bitcoin Risks Deeper Price Pullback as Exchange Inflows Spike
• Market Wrap: Bitcoin Falls to $11.1K; Ethereum Miners at Record Fee Percentage

Jump Trading, the publicity-shy market maker for Robinhood, Bitfinex and BitMEX has made a significant investment into decentralized exchange (DEX) Serum.

• Serum announced Thursday it had received a significant investment from Jump Trading and inked a liquidity partnership with the firm.
• Per a release shared with CoinDesk, Jump Trading will provide market making and liquidity services for assets as they go live on Serum’s platform, which only launched last week.
• The value of the investment was not disclosed.
• Serum’s founding partner Sam Bankman-Fried said the news represented a major step for the maturation of the DeFi space.

See also: FTX to Launch ‘Scalable’ Decentralized Exchange in Weeks

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• Swiss Canton Zug to Accept Taxes in Bitcoin, Ether From Next Year
• Robinhood May Face $10M SEC Fine Over Disclosure Failures
• Digital Bank Revolut Expands Crypto Buying and Selling Service to Australia

Bitcoin (BTC) tumbled about $403 in an hour early Thursday, deepening a two-day sell-off that pushed the largest cryptocurrency to its lowest point in a month.

• The price was down 4.9% on the day to $10,838 as of 13:09 coordinated universal time.
• The move down came after CoinDesk reported that exchange platforms were witnessing elevated inflows of bitcoin, potentially a sign that some investors were preparing to liquidate some of their holdings.
• “Inflows surged as people rushed to sell at near $12,000,” Philip Gradwell, chief economist at the blockchain intelligence firm Chainalysis, tweeted early Thursday.
• U.S. stock futures were down and the dollar was gaining in foreign-exchange markets early Thursday
• A U.S. government report early Thursday showed jobless claims dropped to 881,000, the lowest since the coronavirus pandemic struck earlier this year, though still elevated compared with historical levels.

Also read: Bitcoin Risks Deeper Price Pullback as Exchange Inflows Spike

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• First Mover: As Bitcoin Falls for Second Day, Long-Term Holders Probably Won’t Care
• Bitcoin Risks Deeper Price Pullback as Exchange Inflows Spike
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• Around the Crypto World in 15 Charts: CoinDesk Research’s August Review

Bitcoin (BTC) may soon extend Wednesday’s price pullback, according to a data metric that suggests there’s increased selling pressure in the market.

• While the top cryptocurrency by market value fell by 4% on Wednesday, it defended the long-held support zone of $11,100–$11,200.
• Exchange platforms witnessed an inflow of 92,000 BTC on Wednesday, the biggest-single day rise in 37 days, according to blockchain intelligence firm Chainalysis.
• “Inflows surged as people rushed to sell at near $12,000,” Philip Gradwell, chief economist at Chainalysis, tweeted early Thursday.

• Gradwell believes the selling pressure (arising from the exchange buildup of 92,000 BTC) has probably not been fully absorbed yet.
• That’s because bitcoin’s median trade intensity, which measures the number of times an inflowing coin is traded, remained low at 3.113, well below the 180-day average.
• Put simply, there were not enough buyers to match sellers.
• As such, coins that weren’t liquidated yesterday could still be offloaded into the market in the short run, causing a more profound price decline.

• “I think there is still sell pressure to work through,” Gradwell said.
• Bitcoin is currently trading near $11,300, representing a 0.7% decline on the day.
• As discussed Wednesday, a violation at immediate support at $11,170 would confirm a bearish reversal pattern on the technical charts.

Also read: Open Positions in Deribit’s Ether Options Hit Record High Above $500M

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• First Mover: As Bitcoin Falls for Second Day, Long-Term Holders Probably Won’t Care
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• Around the Crypto World in 15 Charts: CoinDesk Research’s August Review

Authorities in the Swiss canton of Zug plan to begin accepting taxes in cryptocurrency from the start of next year.

• From next February, citizens and companies based in Zug will be able to pay up to 100,000 CHF (around $109,000) of their taxes in either bitcoin (BTC) or ether (ETH).
• No partial payments in cryptocurrency will be accepted.
• For the initiative, authorities have partnered with the Zug-based crypto broker and custodian Bitcoin Suisse, which will convert cryptocurrency payments into Swiss francs and hand them over to the tax office.
• Zug is home to “Crypto Valley,” a loose association of cryptocurrency companies based in the canton.
• In a statement Thursday, Zug Finance Director Heinz Tannler said the move would help to normalize the use of cryptocurrencies in everyday life.
• A pilot of the tax scheme is set to be trialed in the coming weeks, ahead of the planned February 2021 launch.

See also: Crypto Bank Hopeful Bitcoin Suisse Raises $48M in First-Ever Round

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• Robinhood May Face $10M SEC Fine Over Disclosure Failures
• Digital Bank Revolut Expands Crypto Buying and Selling Service to Australia
• Digital Rights Advocacy Group Calls on Coinbase for Greater Transparency
• Hacker Hijacks Twitter Account of Indian Prime Minister’s Relief Fund, Asks Followers for Crypto

Robinhood is reportedly in hot water with a top U.S. regulator for not properly disclosing that it was making revenue by passing customer orders onto market makers.

• Sources speaking to the Wall Street Journal (WSJ) for a report Wednesday said the Securities and Exchange Commission (SEC) is investigating the app-based trading platform
• The allegations are that Robinhood, which is popular with retail investors, failed to disclose that it was selling order flow on its “How We Make Money” page – which was taken down in October 2018.
• In the U.S., brokerages, like Robinhood, have to fully disclose all the material facts investors need to make an informed decision.
• During this period, Robinhood did disclose in regulatory submissions that it was making revenue from order flow payments.
• The SEC investigation is reportedly in an advanced stage, one WSJ source said.
• CoinDesk approached Robinhood for comment, but hadn’t received a response by press time.
• Payment for order flow is a practice where brokerage firms are compensated for routing customer orders to market makers for execution.
• This creates business for market makers; for brokerages, it saves them executing thousands of varied and complex orders, creating a new source of revenue instead.
• While legal, some have argued that selling order flow creates conflicts of interest for brokerage firms.
• Robinhood does now disclose that it makes money from rebates from market makers, and argues that it helps create better prices for the customer.
• Although Robinhood and the SEC haven’t yet entered formal fine negotiations, one WSJ source said the trading app could be looking at a $10 million settlement.
• A settlement could save Robinhood from having to admit to misconduct, one source said.
• Robinhood offers trading of stocks, ETFs and options, as well as 17 cryptocurrencies.

See also: Exchange Outages Are Going Mainstream: What Robinhood Can Learn From Crypto

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• Digital Bank Revolut Expands Crypto Buying and Selling Service to Australia
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• Retail Trading Platforms Pile Into $5M Funding Round for Zero Hash Crypto Settlements Firm

Revolut has opened up its cryptocurrency services to Australian residents for the first time.

• According to a press statement received by CoinDesk on Thursday, Australian customers of the digital banking firm can now buy and sell up to six different digital assets and receive real-time notifications updating users on price movements.
• The offering supports bitcoin (BTC), ether (ETH), litecoin (LTC), bitcoin cash (BCH), XRP and stellar (XLM).
• Australian members of the firm’s premium Metal service will get first access.
• Users can now convert Australian dollars, alongside 26 other fiat currencies, into cryptocurrency using the app.
• In early August, Revolut made its first foray into the Australian market with fiat-based banking services including remittances and loans.
• Founded in July 2015, U.K.-based Revolut is a financial services platform offering banking products through its mobile app, generally targeting younger, web-savvy customers.
• The company has been expanding its crypto offerings internationally this year, most recently to the U.S.
• In July, Revolut updated its terms giving users legal control over their own cryptocurrency on the platform – though they are still not allowed to transfer digital assets out of the Revolut ecosystem.
• Previously Revolut conducted cryptocurrency transactions on behalf of its customers.
• The fintech firm began its foray into crypto in the summer of 2017 after completing a $66 million series B funding round led by Index Ventures, BitPay, Xapo, Balderton Capital and Ribbit Capital.

See also: Digital Bank Revolut Adds Stellar to List of Supported Cryptocurrencies

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• Robinhood May Face $10M SEC Fine Over Disclosure Failures
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• Retail Trading Platforms Pile Into $5M Funding Round for Zero Hash Crypto Settlements Firm

A nonprofit that champions digital rights wants Coinbase to be more transparent in how it handles authorities’ requests for users’ private financial data.

• In a post on its website Wednesday, the Electronic Frontier Foundation (EFF) argued that the U.S.-based cryptocurrency exchange should begin releasing regular transparency reports.
• These should detail the number of government and law enforcement requests for information Coinbase receives and how it goes about dealing with those requests, the EFF said.
• Financial data is one of the “most sensitive types of information” a user produces, the group went on.
• Further, the EFF suggested that how Coinbase responds to government requests could “have a huge impact on what types of speech thrive online.”
• Founded in 1990, the EFF is a nonprofit organization that sets out to defend “civil liberties in the digital world” by championing user’s privacy, free expression and grassroots activism.
• Cryptocurrency exchanges should “especially understand” the importance of privacy, given their users tend to value censorship resistance and anonymity, the EFF said.
• Unlike Coinbase, Kraken, a rival U.S.-based crypto exchange, received high praise for its apparently transparent behavior around requests for information from government and law enforcement agencies.
• Kraken “already recognized the importance of being open on this topic,” said the group, pointing to a tweet in January of a 2019 transparency report showing the U.S. topped the number of requests for information.
• Coinbase built its reputation as a reliable platform by stressing regulatory compliance from the start.
• In June, the exchange initiated procurement deals with a number of U.S. agencies, including the Drug Enforcement Administration and the Internal Revenue Service (IRS), for a cryptocurrency investigations tool called “Coinbase Analytics.”
• The tool enables tracing of transactions conducted across Coinbase, with the IRS claiming the tool possessed “capabilities that are not currently found in other tools on the market.”
• At the time, Coinbase told CoinDesk the analytics data was “fully sourced from online, publicly-available data, and does not include any personally identifiable information for anyone.”
• The exchange has made disclosures about how it would deal with requests for user data.
• In 2018, Coinbase told 13,000 customers it would share “only certain limited categories of information” following demands from the Internal Revenue Service, though it did not disclose precise details.
• It had previously tried to fight the tax agency's request for the information of 14,000 customers in a lengthy legal battle, but ultimately the court sided with the IRS.
• By releasing transparency reports, the EFF said Coinbase could “display leadership” and “fill in the gaps” of current knowledge “by simply shining a much-needed light on government requests for information.”
• Coinbase declined to comment for this article.

See also: Secret Network’s Privacy-Focused Smart Contracts Move a Step Closer to Going Live

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• Robinhood May Face $10M SEC Fine Over Disclosure Failures

A nonprofit that champions digital rights wants Coinbase to be more transparent in how it handles authorities’ requests for users’ private financial data.

• In a post on its website Wednesday, the Electronic Frontier Foundation (EFF) argued that the U.S.-based cryptocurrency exchange should begin releasing regular transparency reports.
• These should detail the number of government and law enforcement requests for information Coinbase receives and how it goes about dealing with those requests, the EFF said.
• Financial data is one of the “most sensitive types of information” a user produces, the group went on.
• Further, the EFF suggested that how Coinbase responds to government requests could “have a huge impact on what types of speech thrive online.”
• Founded in 1990, the EFF is a nonprofit organization that sets out to defend “civil liberties in the digital world” by championing user’s privacy, free expression and grassroots activism.
• Cryptocurrency exchanges should “especially understand” the importance of privacy, given their users tend to value censorship resistance and anonymity, the EFF said.
• Unlike Coinbase, Kraken, a rival U.S.-based crypto exchange, received high praise for its apparently transparent behavior around requests for information from government and law enforcement agencies.
• Kraken “already recognized the importance of being open on this topic,” said the group, pointing to a tweet in January of a 2019 transparency report showing the U.S. topped the number of requests for information.
• Coinbase built its reputation as a reliable platform by stressing regulatory compliance from the start.
• In June, the exchange initiated procurement deals with a number of U.S. agencies, including the Drug Enforcement Administration and the Internal Revenue Service (IRS), for a cryptocurrency investigations tool called “Coinbase Analytics.”
• The tool enables tracing of transactions conducted across Coinbase, with the IRS claiming the tool possessed “capabilities that are not currently found in other tools on the market.”
• At the time, Coinbase told CoinDesk the analytics data was “fully sourced from online, publicly-available data, and does not include any personally identifiable information for anyone.”
• The exchange has made disclosures about how it would deal with requests for user data.
• In 2018, Coinbase told 13,000 customers it would share “only certain limited categories of information” following demands from the Internal Revenue Service, though it did not disclose precise details.
• By releasing transparency reports, the EFF said Coinbase could “display leadership” and “fill in the gaps” of current knowledge “by simply shining a much-needed light on government requests for information.”
• Coinbase declined to comment for this article.

See also: Secret Network’s Privacy-Focused Smart Contracts Move a Step Closer to Going Live

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• Robinhood May Face $10M SEC Fine Over Disclosure Failures
• Digital Bank Revolut Expands Crypto Buying and Selling Service to Australia
• Hacker Hijacks Twitter Account of Indian Prime Minister’s Relief Fund, Asks Followers for Crypto
• Retail Trading Platforms Pile Into $5M Funding Round for Zero Hash Crypto Settlements Firm

Prime Minister Narendra Modi has become the latest victim of a Twitter hack undertaken to trick social media users into sending cryptocurrency to the attackers.

• According to a report by the Nikkei Asian Review on Thursday, a Twitter account of Modi’s personal website known as the Prime Minister’s National Relief Fund (PMNRF) was hacked.
• A series of tweets were posted by hackers asking the PMNRF’s 2.5 million followers to donate to the relief fund using cryptocurrency, Twitter has confirmed.
• It is unclear whether funds were sent to a private wallet address or how much may have been siphoned off.
• Funds from the PMNRF are generally used to provide relief to families of those killed in natural disasters such as floods, cyclones, and earthquakes. Donations are usually paid in fiat.
• “We are actively investigating the situation,” a Twitter spokeswoman said in an email statement cited in the Nikkei. The social media giant is “not aware of additional accounts being impacted,” she said.
• The event follows the recent hacks that compromised several high-profile accounts, including those of U.S. Democratic Presidential nominee Joe Biden, Tesla’s Elon Musk, Kanye West and CoinDesk.
• The attacks used celebrity accounts in order to deceive unsuspecting victims into handing over their bitcoin through a rudimentary giveaway scam promising to double a victim’s funds if they sent it to a particular address.
• In late July, the Federal Bureau of Investigation and local officials arrested three young men in the U.S. in connection with the hacks – including alleged mastermind Graham Ivan Clark.
• Clark has pleaded not guilty to all charges brought against him.
• It is unclear whether those attacks might be related to the one on Modi.

The Modi incident is another sobering reminder to always think twice before sending crypto to strangers on the internet, even if there’s a blue check and the portrait of a head of state in the profile.

See also: Social Engineering: A Plague on Crypto and Twitter, Unlikely to Stop

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Members of Congress are urging the federal government to use blockchain solutions to boost COVID-19 relief efforts.

In a Wednesday letter addressed to the U.S. President Donald Trump and federal officials, lawmakers said blockchain technology can help identify and authenticate individuals set to receive government benefits, streamline supply chains and create a registry of medical professionals. 

This is the latest development in a trend of U.S. lawmakers actively advocating for blockchain applications and virtual currencies, with representatives re-introducing bipartisan legislation in January that would reduce the tax burden on small crypto transactions, and Massachusetts Representative Stephen Lynch (D-Mass.) proposing a bill in April to record national stockpiles on a blockchain. 

Related: Government of Bermuda Pilots Stimulus Token in Response to COVID-19 Crisis

Read more: US Congressman Tom Emmer Will Accept Crypto Donations for Reelection Campaign

The letter was led by the four co-chairs of the Congressional Blockchain Caucus: Reps. Tom Emmer (R-Minn.), Bill Foster (D-Ill.), David Schweikert (R-Ariz.) and Darren Soto (D-Fla.). 

They were joined by Caucus members Stephen Lynch, Warren Davidson (R-Ohio), Jerry McNerney (D-Calif.), Matt Gaetz (R-Fla.) and Ro Khanna (D-Calif.).

“The membership of the Congressional Blockchain Caucus urges your consideration, support and implementation of utilizing blockchain technology that could greatly mitigate the effects of the [c]oronavirus,” the letter said.  

Ongoing effort

Related: US Congressman Tom Emmer Will Accept Crypto Donations for Reelection Campaign

This is not the first time members of Congress have urged the government to consider innovative technologies in the pandemic response. In April, 11 representatives signed a letter calling on the U.S. Treasury Department to consider blockchain and distributed ledger technologies (DLT) in streamlining the distribution of stimulus funds to citizens across the nation. 

Within a week of sending the letter, Lynch introduced a bill to mitigate the failures of the Strategic National Stockpile (SNS) in distributing personal protection equipment such as ventilators to those in need: it would require relevant government agencies to use private blockchain technology to inventory supplies in each state to ensure availability. 

Read more: Bermuda Starts Development of a Blockchain-Based National ID System

The goal of the bill is to facilitate the creation of a network that would allow the government to have a transparent view of stockpiles, and allocate resources to where they are most needed, Lynch told CoinDesk back in April. 

“I think there are reasons for adopting a very secure protocol. You could envision instances where if the country were at war you would not want this system to be hackable and so I think the private blockchain model probably works best,” he said.  

‘Wake-up call’

The lawmakers’ letter to Trump echoes Lynch’s call to use blockchain to create secure and efficient databases. 

The letter makes a case for a blockchain-based identification system, to securely store and authenticate an individual’s identity “to receive necessary funding or supplies” 

The lawmakers explained how the built-in architecture of blockchains can help easily identify individuals when receiving government benefits, while its strong encryption protects sensitive data. It also urged the government to consider putting crucial supply chains that would map origins, inventories and transportation routes on a blockchain.

“The lack of these fundamental supplies has served as a wake-up call across the nation as we continue to struggle to track, reroute, and deliver necessary supplies to those who need them most,” the letter said. 

The lawmakers also suggested that blockchain could help create a comprehensive registry of medical professionals that would verify qualifications, locations and help deploy “skilled resources” in times of crisis.

“Federal regulators must be willing to shed the bureaucracy and implement new solutions,” Rep. Emmer said in a statement to the press. 

Read the full letter below:

Related Stories

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Members of Congress are urging the federal government to use blockchain solutions to boost COVID relief efforts.

In a Wednesday letter addressed to the U.S. President Donald Trump and federal officials, lawmakers said blockchain technology can help identify and authenticate individuals set to receive government benefits, streamline supply chains and create a registry of medical professionals. 

This is the latest development in a trend of U.S. lawmakers actively advocating for blockchain applications and virtual currencies, with representatives re-introducing bipartisan legislation in January that would reduce the tax burden on small crypto transactions, and Massachusetts Representative Stephen Lynch (D-MA) proposing a bill in April to record national stockpiles on a blockchain. 

Related: Government of Bermuda Pilots Stimulus Token in Response to COVID-19 Crisis

Read more: US Congressman Tom Emmer Will Accept Crypto Donations for Reelection Campaign

The letter was led by the four co-chairs of the Congressional Blockchain Caucus: Reps. Tom Emmer (MN-06), Bill Foster (D-IL), David Schweikert and Darren Soto (D-FL). 

They were joined by Caucus members Stephen Lynch, Warren Davidson (R-OH), Jerry McNerney (D-CA), Matt Gaetz (R-FL) and Ro Khanna (D-CA).

“The membership of the Congressional Blockchain Caucus urges your consideration, support, and implementation of utilizing blockchain technology that could greatly mitigate the effects of the Coronavirus,” the letter said.  

Ongoing effort

Related: US Congressman Tom Emmer Will Accept Crypto Donations for Reelection Campaign

This is not the first time members of Congress have urged the government to consider innovative technologies in the pandemic response. In April, 11 representatives signed a letter calling on the U.S Treasury Department to consider blockchain and distributed ledger technologies (DLT) in streamlining the distribution of stimulus funds to citizens across the nation. 

Within a week of sending the letter, Lynch introduced a bill to mitigate the failures of the Strategic National Stockpile (SNS) in distributing personal protection equipment such as ventilators to those in need: it would require relevant government agencies to use private blockchain technology to inventory supplies in each state to ensure availability. 

Read more: Bermuda Starts Development of a Blockchain-Based National ID System

The goal of the bill is to facilitate the creation of a network that would allow the government to have a transparent view of stockpiles, and allocate resources to where they are most needed, Lynch told CoinDesk back in April. 

“I think there are reasons for adopting a very secure protocol. You could envision instances where if the country were at war you would not want this system to be hackable and so I think the private blockchain model probably works best,” he said.  

‘Wake-up call’

The lawmakers’ letter to Trump echoes Lynch’s call to use blockchain to create secure and efficient databases. 

The letter makes a case for a blockchain-based identification system, to securely store and authenticate an individual’s identity “to receive necessary funding or supplies” 

The lawmakers explained how the built-in architecture of blockchains can help easily identify individuals when receiving government benefits, while its strong encryption protects sensitive data. It also urged the government to consider putting crucial supply chains- that would map origins, inventories and transportation routes- on a blockchain.

“The lack of these fundamental supplies has served as a wake-up call across the nation as we continue to struggle to track, reroute, and deliver necessary supplies to those who need them most,” the letter said. 

The lawmakers also suggested that blockchain could help create a comprehensive registry of medical professionals that would verify qualifications, locations and help deploy “skilled resources” in times of crisis.

“Federal regulators must be willing to shed the bureaucracy and implement new solutions,” Rep. Emmer said in a statement to the press. 

Read the full letter below:

Related Stories

• Thailand Is Prepping to Move Judicial System Records to a Blockchain
• Russia, With Bitcoin Playing Bit Part, Tried to Hack 2016 US Election, Senate Report Finds