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Fintech Bill: US Congress Plans to Combat Cryptocurrency Use in Terrorism Financing

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US policymakers have made targeting cryptocurrency-fueled terrorism and the illicit use of digital coins for any purpose a priority.

Rep. Ted Budd (R-NC) of the House Financial Services Committee on Jan. 10 introduced the Financial Technology Innovation and Defense Act to Congress. A key feature of the bill is a fintech task force designed to reward tipsters offering viable information about digital currencies and terrorist use. US policymakers have cryptocurrency-fueled terror on their bipartisan radar, as evidenced by a similar bill, the Homeland Security Assessment of Terrorists Use of Virtual Currencies Act, drafted by Rep. Kathleen Rice (D-NY) last May.

The fact that US lawmakers are focused on intercepting the illegal use of cryptocurrencies and enforcing ethical standards is a positive development for the industry, as it suggests that policymakers have come to terms with a digital coin world even if they’re not in the center of it. It seems like a much more productive use of resources versus attempting to thwart bitcoin to pay for transactions at retailers, for instance.

Rep. Budd’s bill proposes the establishment of an Independent Financial Technology Task Force comprised of half-a-dozen federal officials and a handful from the private sector across banking, nonprofits and think tanks. These individuals would be selected by Treasury Secretary Steven Mnuchin, who would also be included in the Task Force and who recently weighed in on the threat of treating bitcoin as an offshore Swiss account for money-laundering.

Nuts and Bolts

Similar to how the Federal Bureau of Investigation (FBI) offers rewards for information leading to the most-wanted criminals, the task force would create a program to compensate “any person who provides information leading to the conviction of an individual involved with terrorist use of digital currencies,” as per the bill. It doesn’t disclose the size of the reward or whether it would be paid in fiat money or bitcoin.

The task force would further develop a portfolio, dubbed the Fintech Leadership in Innovation Fund, which would be dedicated to developing tools to uncover terror financing and other “illicit use of digital currencies.” Through the fund, the task force can also distribute grants to US companies, universities, etc. that they deem relevant. In making these distributions, officials are especially keen on technologies that support KYC/AML protocols.

At about the same pace lawmakers and regulators are crafting policy, they’re learning about cryptocurrencies. A Senate panel is scheduled to hear testimony from CFTC and SEC officials on bitcoin and the apparent risks to the financial sector in early February, as per a Reuters report. The US SEC already has a task force, their’s focused on ICOs, and the CFTC is the regulator that gave the green light for the CME and CBOE to launch bitcoin futures trading.

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Cryptocurrency Markets Show Signs of Life After $400 Billion Crash

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Cryptocurrency prices are showing signs of life following their $400 billion crash but investors are not out of the woods yet.

Cryptocurrency Markets Show Signs of Life After $400 Billion Crash

The cryptocurrency market cap — a metric which measures the value of all circulating cryptocurrencies — fell as low as $415 billion on Wednesday, a more than 50 percent decline from the $835 billion high-water mark it set earlier this month.

cryptocurrency market cap
Source: CoinMarketCap

Since reaching that low point, though, the cryptocurrency market cap has experienced a 10 percent recovery and is currently valued at $458 billion.

bitcoin price
Source: CoinMarketCap

An examination of the charts demonstrates that while cryptocurrency prices remain firmly in the red for the day, all major coins have returned strong performances over the past hour.

The bitcoin price is currently trading at a global average of $10,116, representing a one-hour gain of six percent and a welcome recovery after following a sub-$10,000 dip earlier in the day. Bitcoin now has a market cap of just over $170 billion and is down 15 percent for the day.

The ethereum price made a nine percent climb, although it remains well below the $1,000 barrier and its market cap will need a $17 billion boost to return to $100 billion.

Third-ranked ripple saw a 10 percent increase that raised its price to just above dollar parity, a mark it had slipped below this morning during today’s 25 percent skid. Nevertheless, the ripple price is still down 49 percent for the week, which is worst among top 10-cryptocurrencies.

Bitcoin cash, meanwhile, rose eight percent to $1,529 but, like most top-tier coins, continues to trade more than 20 percent below its previous-day level.

Cardano and IOTA performed slightly better, rising nine percent in the past hour, while litecoin, NEM and, stellar all leaped by at least 11 percent.

The NEO price’s 20 percent rally to $116 was best among top 10-cryptocurrencies, as was its relatively-mundane weekly decline of four percent.

Ecosystem Purging ‘Easy Money’ Crowd

While cryptocurrency skeptics will likely rush to publish a new series of bitcoin obituaries, the consensus among long-time market observers is that this correction — though severe — is healthy for the market.

Spencer Bogart, a partner at cryptoasset hedge fund Blockchain Capital, compared the pullback to a forest fire, which is both destructive and necessary for the sustained growth of the ecosystem.

spencer bogart

He predicted that the market will purge the “easy money crowd” that joined the markets during the fourth quarter run-up and invested based on pure speculation rather than appreciation for the potential of the underlying technology.

“Wish I could say I was sad to see you go,” he said.

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Cryptocurrencies Are in Free Fall, but Is It All Bad?

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Cryptocurrencies are in free fall, sparing only a handful of coins. But is it all bad? Or can some good come from this flash crash of January 2018?

According to CoinMarketCap, at the time of writing, only five of the top 100 coins by market cap have avoided a plunge in value over the past 24-hours. The vast majority of those falls have been in the double-digits. But the damage has not been limited to altcoins. The top eleven currencies have all similarly recorded double-digit falls.

Bitcoin has fallen to a six-week low, and data from CoinMarketCap recorded Bitcoin’s market cap, at its lowest point, at almost half of what it was a month ago. $250 billion has been wiped off the total cryptocurrency market since Monday.

There are many factors that may have contributed to the bloodletting. There is continued uncertainty over the regulatory future of cryptocurrency in Korea, which represents 12% of global trading volumes. The Chinese tightening of regulations of cryptocurrencies, ICOs, and mining present potential risks to the market’s viability. Although the Chinese contribution to trading volume has fallen to 10%, it had been a significant player in the development of virtual currencies. There are growing fears of more regulation of the industry. French Finance Minister Bruno Le Maire has proposed a discussion ‘on the question of Bitcoin’ at the forthcoming G20 meeting in April. His German and Italian counterparts have agreed. Yesterday, the finance minister announced the formation of a task force to devise regulations for cryptocurrencies, led by a notorious bitcoin skeptic.

Exacerbating the plunge has been the spectacular rise of altcoin valuations over recent months. Those gains have led some observers to predict a dire future for many of these smaller coins that may not offer any new value already provided by the more established coins.

The Bright Side

But in the bloodbath of the current slump, can any good from of it? Consolidation periods can often be healthy ways for markets to avoid forming short-term bubbles, although it could be argued the bubble has already formed. It is also important to remember that the cryptocurrency market has seen major price corrections in the past and bounced back from them.

A rising tide lifts all boats. A correction can provide an opportune time for investors to reassess their strategies. There is a well-known quote in investor circles that “Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.” The euphoria of the past few months may have clouded the judgment of many cryptocurrency and ICO investors.

The blockchain market has become overheated and increasingly sullied by new entrants with dubious credentials, projects without significant benefits or use cases, and little underlying value. Poorly drafted whitepapers now litter the crypto-space. What better way to separate projects that are worthwhile from those that may not be than a substantial crash.

As recently as December, when valuations surpassed $500 billion, Ethereum creator Vitalik Buterin asked the question, “Have we earned it?” The destructive nature of the current crash may force coin developers to focus on creating value and utility for their currencies, and ultimately for the public. This would discourage a reliance on hype-fueled market speculation. This is especially true of altcoins.

Some projects may, in fact, be creatively destroyed. But what will replace them will be better, more valuable, and more useful to a society increasingly reliant on innovative solutions to its many problems.

Furthermore, for seasoned crypto investors, dips are opportune times to buy. For newer investors, this is the first major correction they have experienced. Some may have sold their positions in fear and be too spooked to return to the crypto-space.

For others, it will serve as a reminder that it is sometimes important to ignore the hype. A thorough evaluation of the fundamentals of assets, what unmet needs they serve, how they can be useful, and how credentialed the team behind them is will replace an unsophisticated pump-and-dump mentality. The crypto landscape will be healthier for the greater average wisdom among investors.

Finally, if one of the fears driving the crash – the threat of regulation – does come to fruition, that may actually be beneficial for the cryptocurrency market. A trajectory of a more sustainable growth path and more widespread uptake among retailers, for example, could help cryptocurrencies offer measurable value.

More regulation might also encourage hitherto reluctant fund managers to enter the space, as well as skeptical retail investors, providing more liquidity and greater stability.

So while the January flash crash of 2018 is difficult for investors to enjoy, it may result in some long-term positives.  

For a real-time market cap chart, click here.

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Cryptocurrency Adopters Turn to Bitcoin during Market Downturn

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The dominance index of bitcoin, which calculates the dominance of the cryptocurrency over the global market, has increased over the past 48 hours amidst one of the worst corrections the market has experienced since June 2017.

Is Bitcoin Reserve Currency of Crypto Market?

Since 2016, upon the emergence of digital tokens and alternative cryptocurrencies, many investors have started to consider bitcoin as the reserve currency of the cryptocurrency market. While it often does not return the high profitability of alternative cryptocurrencies, it has a lower volatility rate than most of the cryptocurrencies in the market.

Throughout 2017, both Ripple and Ethereum outperformed bitcoin in annual returns. Ripple led to a 330x return, while Ethereum recorded a 100x increase in price. Bitcoin ended the year with a 15x increase in value.

On January 15, a major correction hit the cryptocurrency market and the vast majority of cryptocurrencies in the market plunged in value. The valuation of all cryptocurrencies in the market declined from $700 billion to $420 billion, by more than $280 billion.

Throughout the correction, the dominance index of bitcoin, which declined to an all-time low in early January, surged from 32 percent to 38 percent, as alternative cryptocurrency investors reallocated their funds into major cryptocurrencies like bitcoin and Ethereum.

Consequently, bitcoin and Ethereum experienced a relatively small decline in value, in contrast, other cryptocurrencies in the market.

Mati Greenspan, senior market analyst at eToro, stated:

“The action we’re seeing may seem dramatic but is really quite normal for this market. All in all, this drop has brought us back to the prices that were traded about a month ago for most cryptocurrencies.”

Was a Correction Good for the Market?

During an interview with CNBC, Greenspan stated that the major correction of the market was beneficial for the global market, especially for Japan and South Korea, because it led to the decline in premiums in certain regions.

Previously, within the South Korean cryptocurrency market, bitcoin, Ethereum, and many other cryptocurrencies were being traded with a premium of around 30 to 40 percent. Traders within the South Korean market were paying 30 to 40 percent more to invest in cryptocurrencies.

One of the major concerns of the South Korean government which triggered the entire cryptocurrency trading ban fiasco was the premiums in the local market and the high prices South Korean traders have had to manage. Greenspan stated that given the premiums in Japan and South Korea declined, and the global market will likely stabilize after the correction, the recent drop in the price of virtually every single cryptocurrency in the market was a positive movement for the global market.

“The premiums that were being paid by Japanese and South Korean crypto traders is also coming down, so that’s a good sign as well, said Greenspan.

It is also important to acknowledge the fact that Ripple, Ethereum, and Dash along with other cryptocurrencies increased by more than 100x in 2017. Economists were calling off cryptocurrencies by describing the market as a bubble due to such returns. But, it would no longer be accurate to call the market a bubble because it suffers major corrections on a regular basis.

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Portuguese Consumer Watchdog Wants Bitcoin Investors Taxed

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At a time in which the cryptocurrency ecosystem endures a significant correction as bitcoin dips below the $10,000 mark, Portuguese consumer protection association DECO wants the government to tax cryptocurrency investors. According to local publication Sábado, the organization sent the Ministry of Finance, and the European commissioner in charge of consumer defense a proposal to tax cryptocurrency gains.

According to the publication, DECO claims a standard 28% tax should be applied to cryptocurrency trading profits, as the same 28% tax is applied to profits earned from stocks and other financial instruments. DECO revealed the move in an edition of its “Proteste Investe” magazine, directed at traditional investors.

According to the organization, it’s unfair that traditional investors have to hand over nearly one-third of their profit, while cryptocurrency investors don’t have to pay anything. Its piece reads (roughly translated):

“What is the argument for not taxing this type of financial operation? A small saver who lends his savings to the state (via savings certificates) or who invests in a company’s shares and creates wealth and employment sees the government keep almost one-third of the profit (income and capital gains are usually taxed at 28%). How can we justify this fiscal inequality? It is difficult. “

André Gouveia, an economist at DECO, restated that every other type of investment is subject to a 28% tax, and as such it’s unfair cryptocurrencies remain exempt.

As previously covered by CCN, Portugal is a country in which the government wants to tax bitcoin users, despite a lack of regulations. The Ministry of Finance has made it clear bitcoin has no legal framework in the country, and yet it claims cryptocurrency earnings are taxable if earned as a result of a professional activity.

According to Sábado, the government is currently keeping potential bitcoin regulations in the hands of the European Union (EU). The government seemingly lets financial regulators, such as the country’s central bank, handle any cryptocurrency-related issues, along with the EU.

When asked, PS [pollical party] Parliamentary Group vice-president and party spokesman João Galamba said “bitcoin should be regulated at the European and G20 level,” adding that it would be counterproductive for the country to create “isolated initiatives.”

Sábado also spoke to left and right-wing parties. Left-wing parties clarified they aren’t planning on doing anything about cryptocurrencies, while right-wing parties stated they are “closely following” the subject, with one of the parties adding it’s evaluating the need for potential regulations.

As covered by CCN, Portuguese bank Santander Totta recently started blocking bitcoin-related transactions, a move that saw some of its clients change banks. As reported, Portugal’s Finance Minister and Eurogroup president Mário Centeno has stated he is confident regulators are overseeing bitcoin’s impact.

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BitConnect Token Loses 90% Amid Exchange Closure Announcement

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BitConnect, a once-promising crypto entity, has lost nearly 90 of its value, as its price has fallen to $26.00 in the wake of announcing the closure of its exchange and lending operation amidst legal problems with U.S regulators. The currency’s market capitalization has fallen to $175,637,617, according to coinmarketcap.com. A total of $17.517 million worth of the currency has traded in the last 24 hours.

1-day activity

BitConnect announced on Tuesday the immediate closure of its lending operation and that of its exchange platform in five days. The announcement said the website will remain open for “wallet service, news and educational services.”

All activity

Regulatory Challenges Emerge

The company gave three reasons for its decision to close: regualtory scrutiny, DDoS attacks and bad publicity.

A Texas securities regulator issued a cease and desist order, claiming the company committed fraud for not clearly identifying its principals and the sources of funds to pay investors 120% interest per year

North Carolina followed Texas by ordering BitConnect to stop soliciting offers to purchase or sell any securities in the state. The Texas and North Carolina cease and desist orders have undermined the platform’s legal continuation, BitConnect stated on its website.

The note blamed outside forces for the DDoS attacks that caused panic, making the platform unstable. In addition, negative publicity has created a lack of confidence in the platform and made the community uneasy, the post noted.

Critics Pile On

Charlie Lee, the creator of Litecoin, publicly stated in December that he refused to invest in BitConnect, saying it seems like a classic Ponzi scheme.

A month earlier, Ethereum founder Vitalik Buterin indicated the promised returns made BitConnect a Ponzi.

BitConnect: We Will Survive

The statement said the services closures does not signify the end of the BitConnect community and that it will continue to offer other cryptocurrency services in the future.

BitConnect said it will continue to support its digital token after closing its lending platform and exchange, claiming the BitConnect X ICO is still functional. An upcoming exchange platform on the website will list its cryptocurrency token BitConnect Coin (BCC).

Since February of 2017, the price gradually rose to a record high of $437.31 on Dec. 29, 2017, then began its rapid fall in early January.

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