CoinDesk Crypto

What a year it has been, and one that will certainly find its way into the history books.

Austrian police say they are investigating a surge in bomb threat extortion attempts after numerous companies received bitcoin-seeking blackmail emails Tuesday morning.

• Companies got an email ultimatum: pay $20,000 in bitcoin in the next 80 hours or risk detonation of a hidden plastic explosive. Instructions on how to buy bitcoin were also included in the email, according to Austrian media.
• Austria’s Federal Criminal Police responded with vehicle patrols in Vienna and Tyrol but found no evidence of bombs. They assume the anonymous senders are international.
• Police said bitcoin bomb threats are a “well-known mass phenomenon,” even if Tuesday’s reports represented an unusual uptick.
• The incident is a stark reminder of cryptocurrency’s appeal to criminals, owing to the irreversibility of transactions and the absence of any third party who can veto them. The flip side is the public audibility of blockchains can help law enforcement track down perpetrators after the fact.

Related Stories

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• Binance Exchange to List Paxos’ Gold-Backed Cryptocurrency
• Blockchain Project Qtum Moves to Boost Network Participation With Offline Staking
• 3 Australian Businesses Tap Chainalysis to Monitor Risky Cryptocurrency Activity

There are more addresses than ever as part of Bitcoin’s “rich list,” the Federal Reserve is looking to change tack on inflation and another firm is putting its cash reserves into bitcoin, not a bank account.

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

Rich list
The “Bitcoin Rich List,” or the number of wallets with at least 1,000 BTC (~$11.5 million), is at a record high. There are approximately  2,190 rich list addresses, surpassing the previous record of 2,184 set Sept. 28, 2019. This could reflect increased interest in bitcoin from institutions and high-net-worth investors, CoinDesk’s Muyao Shen reports. The total amount of bitcoin held in accounts of 1,000 or more was 7,868,823 as of press time. That amounts to $92.2 billion.

Related: First Mover: Ether Price Swings Make Bitcoin Look Tame as DeFi Speculation Spreads

Inflation watch
U.S. Federal Reserve Chair Jerome Powell is expected to signal tolerance for higher inflation during his keynote speech at the Jackson Hole Economic Policy Symposium on Thursday. According to analysts speaking to CoinDesk, that could ultimately lead to further drops in the dollar and greater buying power for bitcoin traders and investors, CoinDesk’s Omkar Godbole reports. The central bank has mostly missed its 2% inflation target since 2012. “The major impact for crypto out of this symposium would be a change in monetary policy and further depreciation of the U.S. dollar, which could propel bitcoin higher,” said Matthew Dibb, co-founder of Stack.

Company breach
A hacker has stolen data on more than 1,000 users from CryptoTrader.Tax, an online service used to calculate and file taxes on cryptocurrency trades. Breaking into a customer service employee’s account, on April 7, the hacker downloaded a file containing 13,000 rows of information, including 1,082 unique email addresses as well as names, payment processor profiles and messages sometimes containing cryptocurrency incomes. Screenshots of this information were later posted to a dark web forum.

BTC over banks
Ottawa-based software startup, Snappa, said it will move 40% of its cash reserves into bitcoin, citing concerns of inflation, global economic uncertainty and the inferiority of traditional bank accounts. The initial 40% allocation is only the beginning for the seven-person startup, CoinDesk’s Zack Voell reports. “We’re still accumulating coins, and we don’t plan on selling anytime soon,” said co-founder Christopher Gimmer. “If we’re right about where bitcoin is heading then our allocation could get very high.”

Blockchain. Governments?
Chinese tech conglomerate Huawei has set up a blockchain-based platform for the Beijing government to better track and manage its citizens’ data in everything from medical records and property registration to real-time vehicle parking status. This is part of China’s larger “New Infrastructure Initiative” to transform digital governance with blockchain by making data immutable and transmissible. The Beijing government’s project aims to leverage the blockchain platform to make data shareable among more than 50 agencies within the municipality, CoinDesk’s David Pan reports.

Quick bites

• Bitstamp to Move Clients’ Accounts From London to Luxembourg (Muyao Shen/CoinDesk)
• Blockchain Project Qtum Moves to Boost Network Participation With Offline Staking (Sebastian Sinclair/CoinDesk)
• DeFi teams accused of hoarding tokens and voting power (The Defiant/Decrypt)
• Ethereum’s Fees Mean Choosing Between a World Computer and a Financial Network (Nic Carter/CoinDesk)
• BitGo Applies to Be Regulated Custodian in New York State (Daniel Palmer/CoinDesk)

At stake

Related: Blockchain Bites: Aave’s Advance, BitMEX’s Block, Turkey’s Bitcoin Trot

Layer1, the U.S. bitcoin mining startup backed by high-profile investors including Peter Thiel, has misdescribed the role of a supposed core team member in a recent pitch deck, according to that team member.

The U.S. startup boasts a mission of not just building top-notch bitcoin mining facilities but also launching the U.S’s first proprietary mining chips to compete with Chinese miner makers.

Its deck – which was shared with CoinDesk by an investor who received it from Layer1 around June – shows a management team slide in which Layer1 told potential investors that Liu Xiangfu, co-founder and a former director of Chinese bitcoin miner maker Canaan, is its Head of Supply Chain. 

However, when reached for comment, Liu said he is not involved in Layer1’s business. “I introduced some of my friends to them. … That did help them when they [came] to China. But I’m not a shareholder [and do] not work for them,” Liu said via WeChat messages. 

The discrepancy came to light as Layer1 has been working to raise $50 million in senior secured debts since June, according to a separate term sheet seen by CoinDesk and confirmed by Layer1. 

It appears only a relatively small part of the raised fund came from external investors at the time, as the recent pitch deck shows that “Layer1 founders have contributed over $23 million of [their] own capital so far to this Series A financing.”

Market intel

Volatile assets
Investors are expecting more volatility in ether (ETH) compared with bitcoin (BTC), according to a key metric, CoinDesk’s Omkar Godbole reports. The three-month spread between ether’s volatility and bitcoin’s has risen to 29%, the highest level since Feb. 23, according to data source Skew. “Investors are focused on DeFi and mindful of a potential big move in ETH,” said Skew’s CEO Emmanuel Goh. Implied volatility does not tell us anything about the direction of the next big move.

‘Negative connotation’
CoinDesk’s First Mover further dives into the volatility conundrum. The three-month spread between ether’s implied volatility and bitcoin’s has increased to 29%, the highest in six months, they write. As recently as June 28, the spread was as low as -2.8%, meaning bitcoin had the higher implied volatility at that point. Volatility often carries a negative connotation because traders often consider it a barometer of risk. In this case the rising spread appears to indicate a wide range of expectations in how DeFi might ultimately affect usage of the Ethereum network and demand for the ether. Get the full story by subscribing here.

Tech pod

Aave overtakes
DeFi credit market Aave has pulled ahead of stablecoin mint MakerDAO for the title of most collateral staked on Ethereum, according to DeFi Pulse. Aave now has $1.47 billion worth of different crypto assets staked for credit lines, while MakerDAO has $1.45 billion in total value locked (TVL). This is only the second time that a project has had more “total value locked” (TVL) than MakerDAO, as measured by DeFi Pulse. In the recent surge of interest in DeFi, four projects have now broken $1 billion in assets as measured by DeFi Pulse at different times: MakerDAO, Compound, Aave and Curve, CoinDesk’s Brady Dale reports.

Op-ed

DeFi’s demise?
Donna Redel, a board member of New York Angels and Adjunct Professor of Law at Fordham Law School, and Olta Andoni, Adjunct Professor at Chicago-Kent College of Law and Of Counsel at Zlatkin Wong, think DeFi is playing a dangerous game. Drawing illusions to the initial coin offering boom, these prominent crypto lawyers see the industry’s “hottest” sector is flirting with regulatory violations. “We believe that, at a minimum, the industry needs self-regulation. Without it, it is on a trajectory to serious regulatory scrutiny and reputational risk… Calling a project an “experimental game” or an ‘innovation’ is not sufficient to take it out of the regulatory ambit,” they write.

Who won #CryptoTwitter? Related Stories

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The North-Korea based Lazarus group of hackers that has been linked to attacks on the central banks of Ecuador, Vietnam and Bangladesh, appears to have targeted a crypto firm in an attack last year, according to a report by cybersecurity firm F-secure. 

• The report said F-Secure’s investigators found operational similarities between this attack and other efforts that have been associated with the Lazarus group. 
  
• Carried out as a phishing attack, the hackers used a LinkedIn message to send over a fake job offer document to a systems administrator at the crypto firm that when downloaded allowed the attackers to get in through the back door. 
  
• Once in, the hackers used backdoor network implants and malware to extract information from the infected computers. According to the report, the attackers also employed Mimikatz, a tailored form of malware used to extract crypto wallet information or bank account details. 
  
• “The evidence also suggests this is part of an ongoing campaign targeting organizations in over a dozen countries,” Matt Lawrence, the Helsinki-based F-secure’s director of detection and response, said in a blog post on the firm’s website. 
  
• Earlier in March, the U.S. Treasury Department announced sanctions against two Chinese nationals who had helped hackers from the Lazarus group launder proceeds from an attack on crypto exchange in 2018. 

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• Tor Network Compromised by Single Hacker Stealing Users’ Bitcoin: Report

Over $1 billion worth of tokens on the Ethereum blockchain are missing a software standard released in 2017, setting them up to be hijacked and drained from trading exchanges, according to new research.

The software vulnerability, called a fake deposit exploit, was pinpointed in 7,772 issuers of ERC-20 tokens, according to research from Peking University, Beijing University of Posts and Telecommunications, Zhejiang University and the University of Queensland. 

The research states that by manipulating code in the smart contracts, or programming scripts, of ERC-20 tokens listed on cryptocurrency exchanges with deficient transaction verification methods, a hacker can fraudulently siphon exorbitant amounts of funds at nearly no cost. The fake deposit attack could then crash the exchange, causing holders of the ERC-20 tokens and other cryptocurrencies to lose their funds.

Related: 0x Price Hits Two-Year High on Hopes Falling Ethereum Fees Will Spur DEX Trading

Read more: How Do Ethereum Smart Contracts Work?

Some holders could also have trouble accessing utilities purchased with the ERC-20 tokens, which are increasingly tied to goods and necessities such as energy, real estate and insurance.

“If the fake deposit attack is carried out, it is for sure a great disaster for the token,” one of the researchers, said Haoyu Wang, Beijing University of Posts and Telecommunications associate professor of computer science. “Worst case, the token has to be reissued.”

Possible fixes

Because smart contracts are permanent on the Ethereum blockchain and cannot be reversed, the onus falls on cryptocurrency exchanges to fix ERC-20 token procedures already prone to the fake deposit attack. Fabian Vogelsteller, the Ethereum developer who created ERC-20 coins, said cryptocurrency exchanges can blacklist malicious token contracts.

Related: First Mover: Wacky Bitcoin-to-DeFi Crypto Markets Might Be New Home of Capitalism

Read more: Token Sales Are Back in 2020

Zhejiang University cyber-science Associate Professor Lei Wu, a second member of the research team, also suggested releasing so-called proxy smart contracts to keep open the option of replacing old Ethereum smart contracts. However, some Ethereum developers have avoided writing proxy smart contracts because they carry their own security risks.

For ERC-20 tokens in the works, the Ethereum Foundation recommends Ethereum blockchain developers implement the protective smart contract software standard as a failsafe against inattentive cryptocurrency exchanges, Wang and Wu said.

How it works: Transaction duping

An ERC-20 smart contract without the Ethereum blockchain software standard EIP-20, introduced in 2017, relies on what is known in computer science as a conditional programming statement to check for insufficient token balances. The conditional statement outputs a “return false” statement that blocks a token transaction from being terminated. This “return false” statement becomes the basis for the fake deposit attack on cryptocurrency exchanges that do not perform security checks after the programming functions “transfer” and “transferFrom” are called.

The attack first works by issuing an ERC-20 smart contract to a cryptocurrency exchange and transferring one ERC-20 token to an exchange account. On a decentralized exchange, the programming function “depositToken” can then tell the “transferFrom” function to deposit however many tokens into the attacker’s account. On a centralized exchange, the “transfer” function is instead called, with the smart contract’s “_to” and “_value” fields set to the attacker’s account address and desired token amount. 

Which ERC-20 tokens are at risk?

The vulnerable tokens with the most trading volumes on decentralized exchanges, CloudBric, MovieCredits, BullandBear, LOVE and EtherDOGE, have had little, if any activity, according to the research. These ERC-20 tokens are circulating on three decentralized exchanges, IDEX, DDEX and Ether Delta, which patched the vulnerability this month, according to the study’s researchers.

Read more: Decentralized Exchange Volumes Rose 174% in July, Topping $4.3B and Setting Second Straight Record

In contrast, 7,716 of the ERC-20 tokens vulnerable to the fake deposit attack – 99.2% of those identified – are listed on centralized exchanges such as Binance, Coinbase, OkEx and Kraken. Affected tokens on centralized exchanges, where the bulk of the standard-missing ERC-20 tokens are trading, were valued at more than $1.1 billion in April. 

Baer Chain’s BRC token, the Brave privacy web browser’s Basic Attention Token (BAT), the Huobi Chinese cryptocurrency exchange’s HPT token, the Rocket Pool Ethereum app service’s RPL token and the Power Ledger electrical grid blockchain’s PWR token had the highest recorded market capitalizations of the vulnerable tokens held on centralized exchanges. Approximately $391,000 in 87,000 BRC, $388,000 in 305,000 BAT, $63,000 in 1,000 HRT, $39,000 in 3,000 RPL and $28,000 in 50,000 PWR were affected, the research said.

Limited identification

When asked, the computer scientists declined to identify the affected Ethereum coins besides those with the top five volumes on decentralized exchanges and the top 5 market capitalizations on centralized exchanges. The researchers also did not determine which centralized exchanges have not undertaken recommended Ethereum token security procedures. 

“For the vulnerabilities and attacks we identified, some of them have been confirmed,” Wang said. Neither the researchers nor PeckShield, a blockchain security company that collaborated with the research team, are choosing to publicly identify vulnerable tokens other than the 10 that are known, Wang said.

Yan Zhu, Brave Software chief information security officer, said the vulnerability is not linked to the Brave browser wallet, and that the affected Basic Attention Tokens were deployed without proxy smart contracts before Ethereum blockchain standard EIP-20 was modified in 2017 to integrate the software implementation that prevents the fake deposit attack.

Read more: Gemini Crypto Exchange Integrates With Privacy-Focused Brave Browser

Power Ledger, on the other hand, deployed its affected ERC-20 tokens even after the Ethereum Foundation released the updated EIP-20 software implementation. For now, John Bulich, Power Ledger technical director, advises Power Ledger customers to “hold their own crypto assets in their own secure wallets” and “not trust centralized exchanges with anything more than their current trading stock.”

The five known issuers of the tokens affected on centralized exchanges did not respond to queries as to whether they have checked with cryptocurrency exchanges about the vulnerability.

Huobi, Baer Chain and Rocket Pool did not respond to requests for comment.

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Last month, Bitcoin Lightning startup Strike announced  it would be working with the world payment giant Visa. Now, another startup in the same vein, LastBit, which just launched its app in beta, will be going through the same Visa Fast Track program. 

This partnership will eventually make it possible for users to pay for items priced in U.S. dollars – but using bitcoin (BTC). LastBit founder Prashanth Balasubramanian told CoinDesk the company will also be releasing an app that works with euros in “a few weeks.”

Read more: Lightning Startup Zap Raised $3.5M for Bitcoin App Ahead of Visa Deal

Using bitcoin for ‘day-to-day’ payments

Related: Ready to Wumbo: LND Enables More, Larger Bitcoin Transactions on Lightning

LastBit’s end goal is to allow users to make Lightning payments to pay for just about anything. The user pulls up the LastBit app, loads bitcoin into it, then has instant access to a digital debit card for sending bitcoin payments. When the user sends a bitcoin payment, the vendor gets euros or dollars on the other side. 

Bitcoin’s Lightning Network helps make bitcoin payments faster and cheaper. A few shops here and there accept Lightning payments, but they’re still not nearly as widely accepted as normal bitcoin transactions. 

Read more: What Is Bitcoin’s Lightning Network?

Ultimately, LastBit wants to allow bitcoin users to walk into any shop and make a purchase with bitcoin, regardless of whether or not the merchant accepts it.

Related: Bitcoin DeFi May Be Unstoppable: What Does It Look Like?

“We simply want to see the masses using bitcoin on a day-to-day basis. To do this, we have engineered arguably the most seamless interoperability between bitcoin and fiat, on top of the Lightning Network, that caters to the needs of both new and experienced users alike,” Balasubramanian told CoinDesk.

European and US expansion

Toward that goal, they’re working in both Europe and the U.S. to open up the possibility of sending bitcoin payments to vendors.

Funded by Litecoin creator Charlie Lee, crypto exchange Binance and database creator MongoDB, among others, the startup cut its teeth in the University of California, Berkeley’s accelerator program. 

Now, as a “small company without millions in the bank,” LastBit has found Visa’s Fast Track program to be a good fit, said Balasubramanian.

Read more: This Visa Card Gives Bitcoin Rewards on Dollars Spent

“The Visa FastTrack program appeared to solve these problems for us to get to market faster and this was why we applied to their program despite being below their ‘minimum funding requirement’ of $1 million,” Balasubramanian said.

While LastBit is working with Visa for U.S. payments, it already has approval to get going in the European Union from MasterCard. That’s the focus for now, with the hopes of proving the product works.

“With a solid product, partnerships and notable investors […] behind us, we’re going to roll out our Bitcoin, Lightning and EUR interoperable payments layer in the EU to prove that this actually works and that a small company without millions can pull off a complex payments product to push for Bitcoin adoption,” Balasubramanian said.

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A gold-backed digital asset created by Paxos will soon launch for trading on cryptocurrency exchange Binance. 

• From Aug. 26, Binance customers will be able to trade PAX Gold (PAXG) against the exchange’s own stablecoin BUSD and exchange token Binance coin (BNB), as well as bitcoin (BTC).
• PAX Gold “will offer [its] users an easy and safe opportunity to gain exposure to real, regulated gold,” said Rich Teo, Paxos co-founder and CEO Asia.
• A New York-based crypto exchange and stablecoin issuer, Paxos launched the gold-backed stablecoin last September.
• Each Ethereum-based token has the legal title to an ounce of physical gold stored in the Brink’s London vault, though traders can own as little as $1 worth.
• Binance’s decision to add support for PAXG comes nearly three weeks after gold’s price reached a record high of $2,075 per ounce.
• The historical inflation hedge has rallied by 27% this year and analysts at Goldman Sachs expect prices to rise further to $2,300 in the next 12 months.
• “Gold is an asset that has had enduring value from generation to generation. With PAX Gold now on Binance, investors can easily get and trade gold with the click of a button,” said Changpeng “CZ” Zhao, CEO of Binance.
• Pax Gold has been approved by the New York Department of Financial Services.
• Also announced Tuesday, CF Benchmarks has launched a benchmark price index for Pax Gold against the U.S. dollar.
• The index will provide a daily settlement and spot rate, refreshed every second, according to an announcement.
• With the traditional gold markets only operating on weekdays, PAXG “opens new opportunities for financial markets,” said Sui Chung, CF Benchmarks CEO.

Also read: Binance.US Expands Into Florida, Eyeing Millions of Potential New Traders

Related Stories

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Market moves

The explosive growth of decentralized finance, or DeFi, on the Ethereum blockchain has brought unwanted attention to the recent surge in congestion on the network, with a resulting jump in transaction fees.

There’s another consequence for crypto traders: Rising volatility in prices for ether, the blockchain’s native cryptocurrency. That’s especially true when ether’s volatility is compared with that of bitcoin. 

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.

Related: Blockchain Bites: Bitcoin’s ‘Rich List,’ Ethereum’s Volatility, DeFi’s Shakeup

The three-month spread between ether’s implied volatility and bitcoin’s has increased to 29%, the highest in six months, according to data source Skew. As recently as June 28, the spread was as low of -2.8%, meaning bitcoin had the higher implied volatility at that point.

Volatility often carries a negative connotation because traders often consider it a barometer of risk. In this case the rising spread appears to indicate a wide range of expectations in how DeFi might ultimately affect usage of the Ethereum network and demand for the ether. 

“Ether’s rising volatility is a byproduct of its own success,” Denis Vinokourov, head of research at Bequant, a London-based cryptocurrency exchange and institutional brokerage, said in a Telegram chat.  “Success comes with risks, the need to hedge.”

Implied volatility represents the market’s expectations of how volatile or risky an asset would be over a specific period. It’s not necessarily bullish or bearish: Heightened implied volatility simply means that future price swings might lie ahead.

Related: Jerome Powell’s Coming Inflation Speech May Weigh On Dollar and Boost Bitcoin: Analysts

“Investors are focused on DeFi and mindful of a potential big move in ETH,” Emmanuel Goh, CEO of the crypto-derivatives data firm Skew, told CoinDesk in a Telegram chat. 

DeFi tokens have been among the hottest performers in cryptocurrency markets this year, with steep rallies in Chainlink’s LINK and the Kyber Network’s KNC. The open-source lending protocol Aave’s LEND token has risen more than 30-fold.

The Ethereum network’s recent spell of congestion has pushed the average transaction fee to record highs above $6.

The heightened volatility expectations might also be an indication of how volatile prices have been this year for ether itself. The second-largest cryptocurrency has tripled, gaining on bitcoin, which is up a respectable 64%. 

Demand for options, or the need to hedge, tends to pick up with price rallies and major fundamental developments, and implied volatilities are primarily driven by the net buying pressure for options contracts like price calls and puts. 

This is what success looks like right now for Ethereum. 

– Omkar Godbole, Markets Reporter

Bitcoin watch

Despite the recent pullback in bitcoin prices, analysts are still bullish in the long term, with Federal Reserve Chair Jerome Powell expected to bolster inflation expectations in a highly anticipated speech Thursday.  

• “Powell has previously stated that he doesn’t think inflation is a significant risk and is prepared to see it overshoot to meet his objectives,” Charlie Morris, chief investment officer at ByteTree Asset Management, told CoinDesk in a WhatsApp chat.
• “The major impact for crypto out of this symposium would be a change in monetary policy and further depreciation of the dollar, which could propel bitcoin higher,” said Matthew Dibb, co-founder of Stack.
• Multiple rejections above $12,000 seen over the past three weeks have put brakes on the rally from July lows below $9,000.
• A deeper pullback may be seen if the immediate support at $11,000 is breached, according to analysts at Stack, a provider of cryptocurrency trackers and index futures.
• The 10-year breakeven rate, which measures the inflation expectations, has risen to pre-Covid levels above 1.6% from the low of 0.5% observed during the March crash.
• Bitcoin has pretty much tracked inflation expectations higher over the past five months, while the dollar index has declined by nearly 10%.
• The cryptocurrency has witnessed bigger year-to-date gains in the U.S. dollar terms, compared to the rally seen in terms of other currencies like the euro and the Japanese yen.
• The data suggests bitcoin’s recent rally has been primarily fueled by the broad-based sell-off in the dollar.

– Omkar Godbole, Markets Reporter

Analogs The latest on the economy and traditional finance

S&P 500 forward P/E multiple now at 25.98, highest since dot-com era (WSJ)

Gold ETFs now hold more gold than every central bank except Federal Reserve (BNN Bloomberg)

Nouriel Roubini sees “no clear alternative currency” to replace USD as reserve currency (MarketWatch)

Money-market yields so close to negative that BlackRock, Fidelity cut fees (WSJ)

HSBC, ABN, Credit Suisse, UBS cutting back as margins shrink, loan losses swell (WSJ)

Tweet of the Day What’s Hot

Central banks in countries with large populations of off-the-books workers are moving faster on digital currencies (Bank for International Settlements)
A recent paper by the Bank for International Settlements looks at the economic reasoning behind central bank digital currencies and how they may be shaped for future implementation via mainstream adoption.

Boston Fed evaluating 30-40 blockchain networks for digital dollar (CoinDesk)
The Federal Reserve Bank of Boston, one of 12 regional Federal Reserve banks operating under the U.S. central bank, is evaluating more than 30 different blockchain networks to determine if they would support a digital dollar.

Bitcoin addresses with >1K BTC hits record high, suggesting growing institutional interest (CoinDesk)
There are more than 2,000 addresses holding over 1,000 bitcoin, potentially reflecting increased interest from institutions and high-net-worth investors.

Bitstamp to migrate customer accounts from London to Luxembourg (CoinDesk)
Cryptocurrency exchange Bitstamp told CoinDesk it will migrate its customer accounts from its London-based Bitstamp Limited to its entity in Luxembourg.

– Sebastian Sinclair, Reporter

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Quorum, the enterprise blockchain platform developed by mega-bank JPMorgan Chase, is being acquired by ConsenSys, the Brooklyn, N.Y.-based Ethereum venture studio.

Additionally, JPMorgan has made an undisclosed strategic investment in ConsenSys, the companies said in a statement. Neither ConsenSys nor JPMorgan would confirm the size of the investment made by the bank.

ConsenSys did confirm it was in the process of raising funds and has a range of additional investors joining JPMorgan. 

Related: cLabs Acquires Summa to Boost Crypto Interoperability on Celo

In terms of how the acquisition will be integrated into the Ethereum conglomerate, from now on, JPMorgan will be a customer of ConsenSys, which is offering software support and services to projects deployed on Quorum. 

All enterprise work being done at ConsenSys will now fall under the new “ConsenSys Quorum” brand, and ConsenSys plans to merge its existing protocol engineering roadmap with Quorum, leveraging the best of both codebases.

“One of the parts of taking over this technology is that we’ll be supporting JPMorgan in [its] blockchain efforts,” ConsenSys engineering manager Daniel Heyman said in an interview. “Then we’ll be able to leverage a lot of the work that JPMorgan has done that’s been internal for a long time, and support the ecosystem as other people want to use that technology.”

Victim of success

As more projects began building on Quorum, a privacy-centric fork of Ethereum, it became obvious to many in the blockchain world that a bank isn’t the right place to maintain a large scale open-source software project. It was first rumored that Quorum could be heading to Brooklyn in February of this year. 

Related: Token Sales Are Back in 2020

JPMorgan and CEO Jamie Dimon received a lot of press for the “JPM Coin” project, which is tokenized cash on the Quorum ledger. Other high-profile initiatives within the bank include the Interbank Information Network, which has over 200 other banks as members, and Dromaius, a debt issuance platform on Quorum.  

“As of today, JPM Coin will be built on top of ConsenSys Quorum,” said Heyman. “So while JPM Coin is 100% JPMorgan’s, we’re very excited that we’ll be supporting it as a software vendor and helping make them successful, as well as other projects like the Interbank Information Network.”

Other projects on Quorum – such as tokenized loans being done by IHS Markit or AURA, the track-and-trace system being built by LVMH – will not receive any funding from ConsenSys, Heyman said, but they will be in line for other benefits. 

“Anyone building on Quorum will get a proper software vendor behind their technology,” said Heyman. “They’ll get a roadmap that’s very explicit publicly maintained that they can build against and move towards, and a suite of features and functionality they can now purchase to accelerate their time to market.”

Interoperability play 

Another important factor for ConsenSys is locking down interoperability between Quorum and Hyperlegder Besu. The latter is an enterprise Ethereum client built by ConsenSys engineers from the ground up to be compatible with the Ethereum public mainnet. The main elements to be aligned to make Besu and Quorum talk to each other include the consensus mechanisms, API interfaces and privacy tools, said Heyman.

“Besu will continue exactly as it is, which is part of the Hyperlegder community and not ours to control. Obviously we’re heavily invested in moving it forward,” Heyman said. “When we sell an enterprise Ethereum stack, we’re going to be calling it ConsenSys Quorum, and it will have two options: the Go Quorum–based version, or the Hyperledger Besu–based version.”

The JPMorgan news was welcomed by Brian Behlendorf, executive director of Hyperledger, who said it was exciting and positive for the enterprise blockchain community.

“It answers concerns about commercial support for enterprises [that] have deployed Quorum and, more importantly, it helps efforts to bring greater interoperability and code re-use between Quorum and Hyperledger Besu,” Behlendorf said in an email to CoinDesk.

Behlendorf, a respected figure in the open-source software world, said the acquisition should make it easy for enterprises that prefer Java, or prefer the Apache 2.0 license, or even prefer to work with other Besu-based vendors, to join the various Quorum-based networks that have emerged. 

“This is textbook open-source ‘co-opetition’ at its finest, where competitors can realize they’re actually stronger working together than trying to divide a market,” said Behlendorf. “We look forward to helping ConsenSys and JPMorgan (who are both Hyperledger Premier Members) and other ecosystem members drive adoption.”

In terms of whether Quorum engineers previously employed at the mega-bank would be making the trip to Brooklyn and joining ConsenSys, Heyman said: 

“Yeah, absolutely. We’ll be working closely with the JPM engineers on this and we’re going to be building out our own team dedicated towards Quorum on the protocol group.”

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Quorum, the enterprise blockchain platform developed by mega-bank JPMorgan Chase, is being acquired by ConsenSys, the Brooklyn, N.Y.-based Ethereum venture studio.

Additionally, JPMorgan has made an undisclosed strategic investment in ConsenSys, the companies said in a statement. Neither ConsenSys nor JPMorgan would confirm the size of the investment made by the bank.

ConsenSys did confirm it was in the process of raising funds and has a range of additional investors joining JPMorgan. 

Related: cLabs Acquires Summa to Boost Crypto Interoperability on Celo

In terms of how the acquisition will be integrated into the Ethereum conglomerate, from now on, JPMorgan will be a customer of ConsenSys, which is offering software support and services to projects deployed on Quorum. 

All enterprise work being done at ConsenSys will now fall under the new “ConsenSys Quorum” brand, and ConsenSys plans to merge its existing protocol engineering roadmap with Quorum, leveraging the best of both codebases.

“One of the parts of taking over this technology is that we’ll be supporting JPMorgan in [its] blockchain efforts,” ConsenSys engineering manager Daniel Heyman said in an interview. “Then we’ll be able to leverage a lot of the work that JPMorgan has done that’s been internal for a long time, and support the ecosystem as other people want to use that technology.”

Victim of success

As more projects began building on Quorum, a privacy-centric fork of Ethereum, it became obvious to many in the blockchain world that a bank isn’t the right place to maintain a large scale open-source software project. It was first rumored that Quorum could be heading to Brooklyn in February of this year. 

Related: Token Sales Are Back in 2020

JPMorgan and CEO Jamie Dimon received a lot of press for the “JPM Coin” project, which is tokenized cash on the Quorum ledger. Other high-profile initiatives within the bank include the Interbank Information Network, which has over 200 other banks as members, and Dromaius, a debt issuance platform on Quorum.  

“As of today, JPM Coin will be built on top of ConsenSys Quorum,” said Heyman. “So while JPM Coin is 100% JPMorgan’s, we’re very excited that we’ll be supporting it as a software vendor and helping make them successful, as well as other projects like the Interbank Information Network.”

Other projects on Quorum – such as tokenized loans being done by IHS Markit or AURA, the track-and-trace system being built by LVMH – will not receive any funding from ConsenSys, Heyman said, but they will be in line for other benefits. 

“Anyone building on Quorum will get a proper software vendor behind their technology,” said Heyman. “They’ll get a roadmap that’s very explicit publicly maintained that they can build against and move towards, and a suite of features and functionality they can now purchase to accelerate their time to market.”

Interoperability play 

Another important factor for ConsenSys is locking down interoperability between Quorum and Hyperlegder Besu. The latter is an enterprise Ethereum client built by ConsenSys engineers from the ground up to be compatible with the Ethereum public mainnet. The main elements to be aligned to make Besu and Quorum talk to each other include the consensus mechanisms, API interfaces and privacy tools, said Heyman.

“Besu will continue exactly as it is, which is part of the Hyperlegder community and not ours to control. Obviously we’re heavily invested in moving it forward,” Heyman said. “When we sell an enterprise Ethereum stack, we’re going to be calling it ConsenSys Quorum, and it will have two options: the Go Quorum–based version, or the Hyperledger Besu–based version.”

The JPMorgan news was welcomed by Brian Behlendorf, executive director of Hyperledger, who said it was exciting and positive for the enterprise blockchain community.

“It answers concerns about commercial support for enterprises [that] have deployed Quorum and, more importantly, it helps efforts to bring greater interoperability and code re-use between Quorum and Hyperledger Besu,” Behlendorf said in an email to CoinDesk.

Behlendorf, a respected figure in the open-source software world, said the acquisition should make it easy for enterprises that prefer Java, or prefer the Apache 2.0 license, or even prefer to work with other Besu-based vendors, to join the various Quorum-based networks that have emerged. 

“This is textbook open-source ‘co-opetition’ at its finest, where competitors can realize they’re actually stronger working together than trying to divide a market,” said Behlendorf. “We look forward to helping ConsenSys and JPMorgan (who are both Hyperledger Premier Members) and other ecosystem members drive adoption.”

In terms of whether Quorum engineers previously employed at the mega-bank would be making the trip to Brooklyn and joining ConsenSys, Heyman said: 

“Yeah, absolutely. We’ll be working closely with the JPM engineers on this and we’re going to be building out our own team dedicated towards Quorum on the protocol group.”

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Crypto custody provider BitGo has filed paperwork with New York’s financial regulator to offer its services in the state.

In an announcement Tuesday, the company said it was seeking approval from the New York State Department of Financial Services (NYDFS) to act as a trust in the jurisdiction.

It plans, if approved, to operate as an “independent, regulated qualified” custodian under the state banking law.

Related: Binance Says Licensed Entities Can Now Use Its Stablecoin After Watchdog Approval

BitGo said it was targeting “strong demand” from institutional investors based in New York for secure and regulated storage of large amounts of digital assets.

See also: BitGo Now Supports Custody and Staking of Tezos’ XTZ

After July guidance from the Office of the Comptroller of the Currency allowing U.S. banks to act as crypto custodians, BitGo said it’s expecting a “dramatic increase in market demand for its products and services from banks, pension funds, hedge funds and other fiduciaries.”

BitGo Trust Company is already a qualified custodian through the South Dakota Division of Banking.

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Blockchain application platform Qtum will soon undergo a hard fork enabling network participants to stake and earn rewards from tokens held in offline wallets.

• Announced Tuesday, the fork – when the blockchain divides to provide an alternative version with different features – will usher in a new code release at block 680,000, expected Aug. 28.
• The upgrade will enable offline wallet address owners to delegate their blockchain-based holdings – technically termed unspent transaction outputs (UTXOs) – to an online node operating Qtum’s proof-of-stake (PoS) consensus.
• PoS is a distributed consensus mechanism that allows users to vote on governance decisions and support the blockchain by dedicating, or “staking,” tokens, earning them network fees as a reward.
• Qtum previously only allowed participants to stake tokens online via a full node, but participation was limited by users who did not want to, or could not, run a full node.
• Offline staking is expected to increase participation, while also enhancing Qtum’s “democratic, distributed, and secure” functionality, according to a statement.
• The fork is being supported by cryptocurrency exchanges including Binance, Huobi, OKEx, Coinone, CoinDCX and Gate.io.
• Qtum launched in 2017 as a hybrid blockchain featuring aspects of Bitcoin and Ethereum to provide smart contract functionality for distributed app developers seeking an alternative platform.

See also: Cardano Introduces Proof-of-Stake With ‘Shelley’ Hard Fork

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U.S. Federal Reserve Chair Jerome Powell is expected to bolster expectations of inflation during his keynote speech at the Jackson Hole Economic Policy Symposium on Thursday.

According to analysts speaking to CoinDesk, that could ultimately lead to further drops in the dollar and greater buying power for bitcoin traders and investors.

• The Fed chief is expected to signal tolerance for higher inflation during the speech, with the central bank having mostly missed its 2% inflation target since 2012.
• “Powell has previously stated that he doesn’t think inflation is a significant risk and is prepared to see it overshoot to meet his objectives,” Charlie Morris, chief investment officer at ByteTree Asset Management, told CoinDesk over WhatsApp.
• A more relaxed approach to managing price pressures could power a stronger rise in long-term inflation in the U.S.
• “The major impact for crypto out of this symposium would be a change in monetary policy and further depreciation of the U.S. dollar, which could propel bitcoin higher,” said Matthew Dibb, co-founder of Stack.
• Inflation is expected by many in the cryptocurrency space to be a driving factor for bitcoin gains, as it’s perceived to be a hedge asset similar to gold.
• The symposium, attended by central bankers, Federal Reserve members, economists, financial organizations and academics, among others, will be held virtually this year.

Inflated expectations

• The 10-year breakeven rate, which gauges the market’s expectations of inflation, has risen to pre-coronavirus levels above 1.6% from a low of 0.5% observed during the March markets crash.
• Bitcoin has largely tracked the metric higher over the past five months, while the dollar index has declined by nearly 10%.
• The cryptocurrency has witnessed greater year-to-date gains in U.S.-dollar terms compared to those seen against other currencies such as the euro and Japanese yen:

• The data suggests bitcoin’s recent rally has been to some extent fueled by the diminishing value of the dollar.
• While the rally appears to be on pause right now, bitcoin looks well positioned to benefit from a resurgence in inflation and further devaluation of the dollar over the long term.
• At press time, bitcoin is trading near $11,550, representing a 1.8% drop on the day, according to CoinDesk’s Bitcoin Price Index.
• Multiple rejections above $12,000 seen over the past three weeks have put brakes on the rally from July lows below $9,000.
• A deeper pullback may be seen if the immediate support at $11,000 is breached, according to analysts at Stack, a provider of cryptocurrency trackers and index futures.

Also read: As Fed Nears Inflation Rubicon, Analysts See $50K Bitcoin in Play

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U.S. Federal Reserve Chair Jerome Powell is expected to bolster expectations of inflation during his keynote speech at the Jackson Hole Economic Policy Symposium on Thursday.

According to analysts speaking to CoinDesk, that could ultimately lead to further drops in the dollar and greater buying power for bitcoin traders and investors.

• The Fed chief is expected to signal tolerance for higher inflation during the speech, with the central bank having mostly missed its 2% inflation target since 2012.
• “Powell has previously stated that he doesn’t think inflation is a significant risk and is prepared to see it overshoot to meet his objectives,” Charlie Morris, chief investment officer at ByteTree Asset Management, told CoinDesk over WhatsApp.
• A more relaxed approach to managing price pressures could power a stronger rise in long-term inflation in the U.S.
• “The major impact for crypto out of this symposium would be a change in monetary policy and further depreciation of the U.S. dollar, which could propel bitcoin higher,” said Matthew Dibb, co-founder of Stack.
• Inflation is expected by many in the cryptocurrency space to be a driving factor for bitcoin gains, as it’s perceived to be a hedge asset similar to gold.
• The symposium, attended by central bankers, Federal Reserve members, economists, financial organizations and academics, among others, will be held virtually this year.

Inflated expectations

• The 10-year breakeven rate, which gauges the market’s expectations of inflation, has risen to pre-coronavirus levels above 1.6% from a low of 0.5% observed during the March markets crash.
• Bitcoin has largely tracked the metric higher over the past five months, while the dollar index has declined by nearly 10%.
• The cryptocurrency has witnessed greater year-to-date gains in U.S.-dollar terms compared to those seen against other currencies such as the euro and Japanese yen:

• The data suggests bitcoin’s recent rally has been to some extent fueled by the diminishing value of the dollar.
• While the rally appears to be on pause right now, bitcoin looks well positioned to benefit from a resurgence in inflation and further devaluation of the dollar over the long term.
• At press time, bitcoin is trading near $11,550, representing a 1.8% drop on the day, according to CoinDesk’s Bitcoin Price Index.
• Multiple rejections above $12,000 seen over the past three weeks have put brakes on the rally from July lows below $9,000.
• A deeper pullback may be seen if the immediate support at $11,000 is breached, according to analysts at Stack, a provider of cryptocurrency trackers and index futures.

Also read: As Fed Nears Inflation Rubicon, Analysts See $50K Bitcoin in Play

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Several Australian companies have turned to products from blockchain forensics firm Chainalysis in a bid to improve their regulatory compliance and reduce risks for users.

• Announced Tuesday, Australian cryptocurrency exchanges Coinjar and Coinspot will utilize Chainalysis’ KYT (Know Your Transaction) and Reactor applications to monitor for high-risk activity.
• Coinspot CEO Russell Wilson said customer protection from bad actors was a “top priority” and that he supported moves to promote trust and compliance across the crypto industry.
• Meanwhile, Australia-based payments provider Assembly Payments will utilize Chainalysis' Kryptos product, a type of industry reference directory, to review profiles of crypto businesses leveraging know-your-customer verification details.
• Chainalysis Chief Revenue Officer Jason Bonds said Australia was a “key component” of the firm’s aim to improve global trust and compliance practices in the crypto market.
• According to Chainalysis, Australian crypto trading volumes in 2020 have risen significantly to around $1 billion in monthly activity, doubling the previous year’s monthly recorded volumes.
• Chainalysis was recently contacted by the Federal Bureau of Investigation and other U.S. government agencies for an investigation into the notorious Twitter hack that used high-profile accounts to promote a well-worn bitcoin scam.

See also: Crypto Tracer Chainalysis Raises $13M as It ‘Doubles Down’ on Government Ties

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The Financial Conduct Authority (FCA), a U.K. regulator, is seeking to oblige more firms, including some working with cryptocurrency, to report how they manage the risks of financial crime.

• In a consultation paper published Monday, the FCA said under the expanded scope of its financial crime reporting obligation it would require crypto exchanges and wallet providers to provide detailed information annually on systems and controls put in place to tackle crimes such as money laundering.
• The regulator said that currently only 2,500 out of the roughly 23,000 firms under its oversight must provide such data, including banks, building societies and mortgage providers.
• Aside from crypto firms, the extended measure would include entities such as all companies regulated by the Financial Services and Markets Authority, payment providers, electric money institutions and multilateral and organized trading facilities.
• The FCA said the extra information the reporting would provide would enable it to be more “date led” in its supervision and widen its insight into firms that may carry money laundering risks.
• The consultation period is open for feedback from interested parties until Nov. 23, 2020.
• In June, the U.K. government said it was looking to increase oversight into cryptocurrency promotions in order to protect investors, with the new supervisory role falling to the FCA.

Also read: UK Regulator Grants License to Digital Security Exchange Archax

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After a dramatic arrest, an Australian serial conman has been extradited to New South Wales to face fraud charges involving over $1 million in bitcoin.

• A Tuesday report by The Sydney Morning Herald said Peter Foster had been escorted by detectives to Sydney, NSW, from Queensland where he had been arrested last Thursday.
• Foster was tackled by undercover police pretending to be early morning joggers on a Port Douglas beach in the northern state.

• After an investigation that kicked off in June, police alleged that from April last year Foster masqueraded under the false name Bill Dawson and scammed victim Konstantinos Stylianopoulos.
• Stylianopoulos had entrusted bitcoin to Foster who then allegedly transferred it to his own account at the Australia-based crypto exchange Independent Reserve.
• The fraud netted Foster 1.73 million Australian dollars (US$1.24 million)-worth of bitcoin in transactions of between $125,000 and $890,000 on multiple occasions.
• Foster has been described as a career criminal, having previously spent time in jail in Australia, the U.K., the U.S., and Vanuatu for fraud-related crimes.
• Paul Dunstan, the Sydney City Police area commander detective acting superintendent, noted Foster’s repeat offenses and said Foster was “a significant fraud offender.”
• The charges relating to his arrest include five counts of publishing false and misleading material to obtain advantage and 10 counts of dishonestly obtaining financial advantage by deception.
• He is also being charged with knowingly dealing with proceeds of crime with intent to conceal, according to the Herald.
• On Tuesday, Foster’s legal representation appeared in Sydney’s Central Local Court via video link opting not to apply for bail. The case will return to court on Oct. 22.

See also: Australian Woman Jailed for Theft of More Than 100,000 XRP

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Decentralized finance (DeFi) credit market Aave has pulled ahead of stablecoin mint MakerDAO for the title of most collateral staked on Ethereum, according to DeFi Pulse.

Aave now has $1.47 billion-worth of different crypto assets staked for credit lines, while MakerDAO has $1.45 billion in total value locked (TVL). 

“Reaching the highest TVL was possible due to the wide range of developers building on top of Aave who are expressing their innovation in DeFi,” Stani Kulechov, Aave CEO, told CoinDesk. “This innovation has sparked interest from institutions who are now dipping their toes into Aave.” 

Related: DeFi Aggregator Bella Protocol Announces $4M Seed Round

Read more: What Is Yield Farming? The Rocket Fuel of DeFi, Explained

This is only the second time that a project has had more “total value locked” (TVL) than MakerDAO, as measured by DeFi Pulse. On June 20, fueled by a yield farming rush spurred on by the initial distribution of its governance token COMP, Compound took the lead for collateral locked up until late July.

For context, though, when MakerDAO and Compound switched positions, each had about $480 million in TVL. MakerDAO now has well over twice the collateral locked up as it had then. 

In the recent surge of interest in DeFi, four projects have now broken $1 billion in assets as measured by DeFi Pulse at different times: MakerDAO, Compound, Aave and Curve.

Fertile soil

Related: DeFi Is Just Like the ICO Boom and Regulators Are Circling

Founded as EthLend, Aave was conceived as a peer-to-peer crypto lender, funded by a 2017 initial coin offering that raised $16.2 million, according to Messari. It later pivoted to the pooled lending approach it uses today.   

With creative new communities of yield farmers coming up with wild schemes, Aave has proven to be a key financial backbone of some projects, as Devin Walsh of CoinFund explained to CoinDesk.

In particular, she noted that Curve and Yearn Finance rely on Aave. “Stablecoin deposits into either of those protocols will ultimately be deposited into Aave’s money markets. Both Yearn and Curve’s yield farming programs have contributed to the massive spike in TVL over the past few weeks and in particular over the past week,” she wrote in an email. 

Read more: Five Years In, DeFi Now Defines Ethereum

Another relevant project is Opium, which announced Saturday it had created a credit default swap (CDS) on the Aave protocol. A CDS is a type of contract that insures the buyer against a third party defaulting on a loan. These instruments are best known for their role in the 2008 financial crisis, though they arguably provide markets an early warning signal of credit problems.

Aave has announced a governance token distribution plan, but it has not yet taken effect. So while liquidity mining is coming to the protocol, it’s not driving the current surge.

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Beijing-based decentralized finance (DeFi) aggregator Bella Protocol announced Tuesday it has raised $4 million in a funding round led by Arrington XRP Capital. 

• According to a press statement emailed to CoinDesk, investors in Bella’s funding round also include Alphabit, Consensus Labs, Force Partners and CGS Dubai, among others.
• Marketed as a one-stop shop for DeFi assets, the firm’s asset management platform is currently under development.
• The firm said its platform aims to fix the complex user experience issues related to DeFi assets, such as the need to hop among different protocols and platforms in pursuit of high yields.
• “What Bella is aiming to solve with 1click and flex saving are the three largest barriers to achieving DeFi or crypto mass adoption – high gas fees, complex user journey and poor user experience,” Michael Arrington, founding partner of Arrington XRP Capital, said in the emailed statement.

Read more: DEX Aggregator 1inch Raises $2.8M From Binance Labs, Galaxy Digital and More

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Binance’s U.S. affiliate has taken Florida off its cryptocurrency trading “no-fly list” and on Monday opened for business in the sunshine state. 

• The expansion into America’s third-most populous state follows Binance.US’s July procurement of a Floridian money transmitter license under the name “BAM TRADING SERVICES INC.”
• Florida was one of the 13 states not included in Binance.US’s original game plan. When the exchange launched in 37 states last September, Binance.US avoided states whose licensure regimes required additional vetting.
• Binance.US chief Catherine Coley, who grew up in Orlando, told CoinDesk the two-year Florida license grants her exchange access to what is now its second-largest potential market: 12 million eligible traders. 
• “We’re well aware that not every single person above the age of 18 is going to download Binance.US tomorrow, but it is a huge population that is ripe for understanding how digital assets work,” she said. 
• Heavily populated states such as New York and Texas are still out of bounds for Binance.US. Coley said more states will be added as their respective money transmitter licenses clear. 

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