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BTC Outflow on BitMEX Exceeded Inflow by $73M: TokenAnalyst

Bitcoin outflows on BitMEX exceeded inflows by $73 million after the exchange was reported to be investigated by the CFTC.

Bitcoin (BTC) outflows on major crypto exchange BitMEX have notably exceeded the inflows after the firm was reported to be a subject in a regulatory investigation.

Bitcoin outflows on BitMEX exceeded inflows by $73 million

Over the past 24 hours, BitMEX saw an outflow of $83 million worth of Bitcoin, while only $12 million came in, London-based blockchain data provider TokenAnalyst reported in a tweet on July 19.

24-hour on-chain Bitcoin flows on major exchanges. Courtesy of: TokenAnalyst Twitter

24-hour on-chain Bitcoin flows on major exchanges. Courtesy of: TokenAnalyst Twitter

While such a discrepancy appears to be abnormal in comparison with other exchanges, such as Binance, which saw a $54 million outflow alongside an inflow of $58 million, BitMEX exchange has experienced outflow dominance several times before, according to TokenAnalyst.

Historic inflow and outflow on BitMEX. Courtesy of: TokenAnalyst

Historic inflow and outflow on BitMEX. Courtesy of: TokenAnalyst

Bitcoin outflow dominance on BitMEX is normal due to the amount of Bitcoin held on the platform

The spike of Bitcoin outflows came amid recent reports that United States regulator the Commodity Futures Trading Commission (CFTC) launched an investigation of the company. The authority is allegedly probing BitMEX as the United States is one of the countries excluded from using the exchange, which is registered in the Seychelles.

While some commentators online considered the recent spike of outflows on BitMEX a sign of panicked leaving, industry Twitter personality WhalePanda said that it is a normal reaction, taking into account the amount of Bitcoin held by BitMEX. He wrote: “It’s more of a reminder for people who don’t actively trade their entire stash to withdraw (some of) it.”

BitMEX is the world’s second largest crypto exchange according to reported daily trading volume to date, with its Bitcoin trading amount accounting for $3,2 billion at press time, according to data from CoinMarketCap.

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Tether’s Trouble With New York Attorney General — Will Crypto Cope?

Tether vs. New York: Regardless of who wins or loses, crypto will keep growing.

Are Bitfinex and Tether in trouble? Maybe, but the thing is, we don’t know just how much trouble, because the stablecoin issuer has challenged the New York State Office of the Attorney General’s (OAG) case against them. In claims filed in April, Attorney General Letitia James asserted that Bitfinex defrauded its customers, having lost $850 million in client and corporate funds, and then having attempted to cover up this loss by secretly helping itself to around $900 million of Tether’s cash reserves. 

Serious charges, but they’re denied by Bitfinex and Tether’s parent company, iFinex, which responded in April that the OAG’s claims were “riddled with false assertions” and that the lost $850 million is being safeguarded, although it didn’t specify whether this amount is being held by Crypto Capital Corp. (which initially received it) or by some other entity. Regardless, iFinex has applied to have the case dismissed, arguing that the OAG has no legal basis to sue it for the simple reason that Bitfinex wasn’t operating in New York during the period at issue.

However, while a New York judge has questioned the attorney general’s “vague, open-ended” claims and asked for a more precisely constructed revision, recent news surrounding the closing of a New York-based bank account indicates that Tether and Bitfinex may very well have been operating in the state of New York. This would suggest that the OAG’s claims are legally valid and that Bitfinex and Tether may end up facing serious repercussions. But even if it does, certain crypto-related legal experts suggest that this wouldn’t necessarily be such a huge blow to crypto, which will endure with or without the liquidity provided by the Tether stablecoin, USDT.

The New York connection

On July 10, it was reported that the crypto-friendly Metropolitan Commercial Bank had closed accounts associated with iFinex. The company and its affiliates had held these accounts for around five months, after which they were closed, with iFinex itself stating that they were discontinued largely because of inactivity. According to iFinex: 

“Metropolitan Commercial Bank had limited, corporate operating accounts with Tether Holdings LTD, iFinex Inc, and Digfinex Inc, all with negligible activity, and requested the accounts to be closed after less than 5 months of the accounts being opened.”

As Cointelegraph has reported previously, iFinex denies that Bitfinex and Tether were operating in New York, and it’s partly on this basis that the company believes the OAG’s case should be thrown out. For its part, the OAG claimed in an affirmation filed in July that iFinex opened the accounts in December 2017 and “transacted in those accounts thereafter.” Similarly, it also notes that it held accounts with another New York-based bank, Signature Bank, and “transacted in those accounts until at least April 2018. During that time period, transactions were initiated in those accounts by a senior executive of Respondents located in New York.”

But even if iFinex held accounts with New York-based banks, there’s still no guarantee the OAG can legally establish that Bitfinex and/or Tether were actually operating in New York and serving New York-based customers. As crypto-specialized lawyer Preston Byrne told Cointelegraph, the simple fact of having an account with a New York-based bank isn’t likely to be enough on its own to legally establish operations in the state. He added:

“The short answer is that it depends on what the company is doing and what jurisdictional hook the state uses to regulate the conduct. For any company, the outcome of this analysis will be very fact-dependent. To the extent there is any possible nexus with New York State, businesses really should confer with New York counsel for that advice.”

Other lawyers agree that the simple possession of a New York-based account isn’t enough on its own to prove anything. Aviya Arika, a lawyer and the chief of blockchain at Aviya Law, explained to Cointelegraph that, during her time as a lawyer, she has opened dozens of bank accounts for clients in numerous nations when responding to the question of whether iFinex having New York-based accounts proves that it operated in the state. Arika said:

“This experience has taught me that having a bank account in country x doesn’t necessarily mean the company is targeting or soliciting clients in that country. Therefore my answer would be negative.”

“I don’t see a mandatory connection between the two,” she clarified, noting that, conversely, it’s also possible to target New York clients and have your bank account anywhere else in the United States. Arika also pointed out that iFinex isn’t the only crypto-related company to have set up with Metropolitan and that it’s likely many other clients of the bank don’t operate in New York State. She said:

“Metropolitan Bank has become very popular in crypto talk and I’m pretty sure not all companies who have accounts there are working with clients in New York. Because of the relative scarcity of crypto friendly banks, companies are not being as picky as to narrow down their options and approach only those within their target markets.”

The outcome

The above would suggest that the OAG may struggle in establishing that Bitfinex and/or Tether operated in New York. Nonetheless, it needs to be underlined that the attorney general is indeed making the claim that Bitfinex and Tether served New York-based customers and didn’t only have bank accounts located in the state. For example, in its affirmation from early July, Assistant Attorney General Bryan M. Whitehurst wrote that “documents obtained by the OAG in the course of its investigation demonstrate that Respondents did in fact allow customers located in New York to transact on the Bitfinex trading platform after January 30, 2017,” which is when Bitfinex announced that it was officially barring New Yorkers from the exchange.

The affirmation then proceeds to cite various pieces of evidence that Bitfinex was serving New York-based customers. For example, Whitehurst refers to enclosed evidence (not publicly available) of correspondence between Bitfinex and a digital currency trading firm located in New York, which used Bitfinex to trade on behalf of numerous “offshore vehicles” and which “conducted significant activity on the Bitfinex trading platform through at least early 2019.” Likewise, the OAG also cites evidence that Bitfinex set up an account for Galaxy Digital and “associated entities,” as well as evidence testifying to the use of Bitfinex by New York-based traders as late as 2019.

Given that these aren’t the only pieces of evidence the OAG claims to possess, it would seem that iFinex may not be successful in having the case thrown out. That said, there still isn’t certainty that the attorney general will succeed in proving a link with New York because, as Aviya Arika indicates, other factors complicate the issue. “Another interesting issue here would be the non-solicitation issue,” she said. “What the court’s approach will be if Tether had allowed NY residents to transact but had not solicited or targeted them and had created the relationship with them completely passively.”

Also, proving an operational link with New York is one thing, but proving the defrauding of customers — which the Attorney General is ultimately attempting to substantiate — is another. And it’s precisely here that the biggest uncertainty resides, with Byrne affirming that, because of the infancy of the legal battle, it would be unwise to stick your neck out with a decisive prediction either way.  Byrne clarified: “It’s impossible to know at this phase. I would imagine both sides of this litigation are keeping their cards close to the vest.”

Still, even with this uncertainty, it’s unlikely that the New York attorney general would have sued iFinex if it didn’t believe it had a strong case, as suggested by Aaraon Kaplan, a former lawyer who is now the CEO of New York-based trading platform Prometheum. He told Cointelegraph:

“The outcome of the NY AG’s case against Tether will be determined by the facts and circumstances. The attorney general tends to only bring cases they believe they have a good chance of winning. I anticipate that the NY Attorney General believes the state has a very strong case against Tether.”

Implications

But assuming for the sake of argument that Bitfinex and Tether had defrauded customers by covering up an $850 million loss, it would be interesting to consider the kind of impact their defeat in a legal battle would have on iFinex and on the wider cryptocurrency industry. For one, it’s likely that iFinex would be hit with a hefty fine, and given that Bank of America had to pay a $42 million penalty in 2018 in connection with electronic trading fraud, it’s possible that any fine it could potentially receive would be somewhere in the same region, although it is known that other firms have paid billion-dollar fines to the state of New York in recent years.

“The penalties Tether would face would be heavy fines that it would probably not recover from,” Arika said. This is a grave prediction, and while a $42 million-dollar fine probably wouldn’t be financially ruinous for iFinex, the damage to its reputation could be more far-reaching — as could be any legal orders it receives concerning its business practices in the U.S. (e.g., the New York attorney general has shut down companies in the past). And if we take the absolute worst-case scenario — the closure of iFinex and the end of Tether — then the implications for crypto could be very ominous. Byrne has also added that a bad outcome for Tether may affect the crypto market negatively:

“As to the wider market, all indications are that Tether plays an increasingly important systemic role in the Bitcoin and cryptocurrency markets. Removing Tether from these markets for any reason would be likely to create a severe liquidity crunch among a number of overseas exchanges that rely on Tether for USD liquidity and could lead to substantial market disruption.”

Indeed, USDT has been pivotal in crypto bull markets over the past couple of years, with this year’s rally coming amid a doubling of the Tether supply. In fact, the supply of USDT more than doubled momentarily on July 13, when Tether printed 5 billion USDT tokens, only to burn them almost immediately after. According to the company’s chief technology officer, Paolo Ardoino, this was simply the result of putting a decimal point in the wrong place during the transfer of 50 million Omni-based USDT tokens to the Tron blockchain. However, given that Tether hadn’t been entirely honest regarding its 1:1 backing of USDT, for instance, a number of suspicious tweeters raised the entirely speculative possibility of foul play.

Tether’s past importance to crypto aside, other experts believe that the cryptocurrency market would continue to exist and thrive without Tether. As Weiss Ratings’ Juan Villaverde told Cointelegraph in a recent article, the post-April bull market has arguably seen Bitcoin become less dependent on the liquidity provided by USDT, saying, “Let’s not forget that the rally we’ve seen in Bitcoin accelerated around late April, precisely when the market was concerned about the sustainability of USDT as an asset class.” Villaverde continued on to clarify that much the same thing had occurred in October, when Bitcoin jumped by over 10% intraday, despite question marks surrounding the transparency of the Tether stablecoin. His point was that the market had already spoken on the issue of USDT, telling us that, even with doubts concerning the stablecoin’s sustainability, the markets were liquid enough to soak up any capital flight.

This may be an optimistic view of things, but Villaverde isn’t the only commentator who believes that Tether’s hypothetical collapse wouldn’t have massive knock-on effects for crypto. In much the same vein, Arika also believes that a hypothetical proof of Tether’s fraudulence wouldn’t irreparably affect the cryptocurrency industry’s reputation, saying:

“If Tether turns out to be a bad actor it would be unfortunate but it shouldn’t stain the whole crypto market. Bad actors exist in every industry. The problem is the negative buzz and the false reaffirmation that the crypto industry is fishy. Generally I think that the creation of case law and pragmatic application of the law to crypto companies is beneficial and constitutes a natural development.”

Kaplan agrees, explaining that a potential loss for Tether could be beneficial for crypto insofar as the industry is in dire need of standardization. According to Kaplan:

“The crypto industry needs to realize that in order for crypto to go mainstream there needs to be integrity in the market. That integrity will either be forced upon the industry by regulators and legal actions, or will require standardization and best practices to eliminate activities like commingling customer and exchange funds.”

Taken together, the above observations point to two main points: 1) there isn’t enough public evidence right now to conclude either way on whether iFinex defrauded New York-based customers; and 2) even if such evidence emerges and the New York OAG wins its case, the cryptocurrency industry will live on regardless. In other words, you should be worried about Tether’s fight with New York only if you happen to be Tether.

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Bitcoin an ‘Unstoppable Force,’ US Congressman Tells Crypto Hearing

Patrick McHenry warned lawmakers that they would ultimately fail if they attempted to control decentralized cryptocurrencies.

Bitcoin’s (BTC) plight in Congress has seen attention focus mainly on naysayers, but this week’s hearing also saw United States politicians accept it was always beyond their control.

‘Governments cannot stop this innovation’

During testimony on July 17, U.S. Congressman Patrick McHenry, who represents North Carolina’s 10th District, told lawmakers directly that attempts to stop Bitcoin were futile.

“The world that Satoshi Nakamoto, author of the Bitcoin whitepaper envisioned, and others are building, is an unstoppable force,” he said.

McHenry runs in sharp contrast to other Congressmen making the headlines over Bitcoin, with Brad Sherman again gaining the spotlight after making dubious claims about cryptocurrency’s role in crime.

Others broadly failed to draw a distinction between Bitcoin and permissioned digital currencies, specifically Facebook’s Libra project, which formed the initial basis for the hearings.

For McHenry, however, legislation or not, Bitcoin will prevail. If it were possible to shut it down, he implied, an adversary would have already done so at some point since its 2009 inception.

“We should not attempt to deter this innovation; governments cannot stop this innovation, and those that have tried have already failed,” he continued.

Nations coming to grips with crypto

As Cointelegraph reported, the Congressional hearings came as other states are currently coming to grips with the first incarnation of their regulation of Bitcoin and other decentralized cryptocurrencies.

Notably, India this week confirmed it was working on official guidelines after a scandal involving what some accepted as a draft law banning cryptocurrency outright appeared earlier.

The fallout of the document, which mandated prison sentences for Bitcoin users, resulted in billionaire investor Tim Draper calling the Indian government “pathetic and corrupt.”

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Bundesbank Head Says Don’t Suppress ‘Innovative Concepts’ Like Libra

Bundesbank President Jens Weidmann spoke in favor of Facebook’s Libra during a recent G7 event, a report says.

The head of Germany’s central bank Jens Weidmann spoke in favor of Facebook’s Libra during a recent G7 event.

Bundesbank head warns against suppressing innovation

Weidmann, Bundesbank President and the Governing Council member of the European Central Bank, argued that global regulators should not suppress the project in its infancy, according to an email newsletter in a shared by eToro senior market analyst Mati Greenspan on July 19.

According to the letter, Weidmann reportedly supported the Libra project during a recent G7 meeting, arguing that digital currencies such as Libra can be attractive to consumers in case if they deliver what the promise.

The head of the Bundesbank urged the global community to allow time to initiatives like this, emphasizing the nascent stage of the Libra’s development and warning against inadvertently suppressing innovative concepts before all the details have been clarified.

Previously, Bundesbank’s representative Burkhard Balz claimed that crypto does not pose a threat to financial stability.

G7 cannot accept private companies issuing currency

Meanwhile, G7 finance ministers have recently warned that digital currencies such as Libra pose risks for the world’s financial system if they are not regulated tightly. During a news conference on July 18, French finance minister Bruno Le Maire reportedly said that G7 “cannot accept private companies issuing their own currencies without democratic control.”

Weidmann’s new supporting word for Libra somewhat contradicts with some of his previous remarks about digital currencies. In late May, Weidmann expressed concerns over the potential risks of digital currencies, including destabilization of the financial system. At the time, the official said that easy access to digital currencies could speed up a collapse of lenders, which would fundamentally alter the business model of banks even in a good economic environment.

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Bloomberg: U.S. Regulator Investigating BitMEX for Allowing Americans to Trade

Suspicions are reportedly focusing on U.S. users circumventing a ban on trading.

United States regulator the Commodity Futures Trading Commission (CFTC) is reportedly investigating derivatives giant BitMEX.

According to sources citing people familiar with the matter speaking to Bloomberg, the CFTC suspects that BitMEX, which is registered in the Seychelles, allowed U.S. residents to use its platform to trade.

Under current law, the U.S. is one of the countries excluded from using BitMEX and similar crypto-based financial services, but users may have sought to circumvent the geoblock using services such as VPNs.

The investigation, details of which have not yet been confirmed by either BitMEX or the CFTC, came to light on social media via Bloomberg journalist Tim Culpan. 

Bitcoin (BTC) was under heavy pressure as the news broke Friday, dropping around $500 in minutes to target $10,000.

This story will be updated.

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Mexican Crypto Exchange Bitso Seals DLT License from Gibraltar Regulator

Mexican cryptocurrency exchange Bitso will from now on be regulated by the Gibraltar Financial Services Commission.

Mexican cryptocurrency exchange Bitso will from now on be regulated by the Gibraltar Financial Services Commission (GFSC), a July 19 announcement revealed.

An apparent first in Latin America

In what Bitso claims is an apparent first in Latin America, as of August 1, the custody, withdrawals, deposits and trading of cryptocurrencies on its platform will be overseen by the GSFC under a framework specifically evolved to regulate businesses in the distributed ledger technologies (DLT) sector. 

GSFC’s Distributed Ledger Technology Regulatory Framework — finalized in January 2018 — focuses on ensuring robust consumer protection and security, as Bitso notes. Yet the exchange argues that the framework’s application is “conveyed through the application of principles rather than rigid rules” and is thus fit to keep pace with the pace of innovation in the DLT sphere.  

The agency’s issuance of a so-dubbed DLT license to successful applicants such as  Bitso has forged the overseas United Kingdom territory regulator a reputation as a proactive and forward-thinking actor in the global sector.

Bitso reveals that its choice of cooperation with the GFSC stems back to a meeting with the regulator’s team during an international FATF forum. Notwithstanding its compliance into Gibraltar’s crypto regulatory regime, the exchange says it continues to work closely with local financial regulators to promote the enactment of the Fintech Law in Mexico.

Crypto regulatory frontiers

In terms of user experience, the company notes that while using Mexican pesos, clients will continue to use existing services such as SPEI, cash funding or Bitso Transfer ® — and will still be under the operational oversight of Bitso S.A.P.I. de C.V, which is regulated under Mexico’s Fintech Law.

When it comes to crypto interactions, all activities will from August fall within the scope of the GFSC DLT Regulatory Framework. The firm pledges to transparently indicate and uphold a strict separation between services provided in Mexico and those provided in Gibraltar.

As Cointelegraph has previously reported, major Singapore-based cryptocurrency exchange Huobi sealed a DLT license from the GFSC in December of last year, weeks after the Gibraltar Blockchain Exchange (GBX) was granted one.

This spring, the European Economic Area (EEA)-regulated Gibraltar Stock Exchange (GSX) launched listings of blockchain-powered securities on its GSX Global Market.

In February 2018, Gibraltar announced a trailblazing draft law for initial coin offerings (ICOs), drawing industry-wide interest.

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China Ruling Bitcoin is Property Again Is ‘Major Milestone,’ Says Investor

A court dispute between an exchange and a user reinforced China’s willingness to recognize the cryptocurrency.

Bitcoin (BTC) has gained legal recognition by a second Chinese court in a further boost for the cryptocurrency in one of its harshest environments.

A watershed for Bitcoin in China

According to investor Dovey Wan, who linked to local media coverage, the Hangzhou Internet Court formally described Bitcoin as virtual property on July 18. 

The second such court to attribute property status to Bitcoin, the ruling came about as part of a dispute between a now-defunct exchange and one of its users who lost funds. 

For Wan, the case marks a significant watershed for Bitcoin in China, where a blanket ban on trading it has been in place since September 2017. 

BTC/USD rallied sharply Friday on the back of positive comments from United States lawmakers, but China likely also influenced the return to form.

“This case is a major milestone that manifested BITCOIN IS ACTUALLY LEGAL in China,” she wrote on Twitter. 

‘It’s virtual property, but not fiat money’

As Cointelegraph reported, China has long formed a curious focus for Bitcoin analysts despite the state-imposed moratorium on using it. As Bitcoin staged a comeback in 2019, evidence began emerging that consumers were finding alternative on-ramps to traditional exchanges, such as purchasing stablecoin Tether (USDT) via over-the-counter deals.

According to local English-language news outlet Global Times, China’s central bank, the People’s Bank of China (PBoC) — which imposed the 2017 ban — did not explicitly disagree with the Hangzhou decision.

“Indeed, Bitcoin is virtual property, but it’s not fiat money,” a PBoC official with the surname Li told the publication Friday.

The comments nonetheless come in stark contrast to the state’s perspective on Facebook’s Libra digital currency project, with officials saying they were concerned and had even begun developing a digital currency of their own.

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Trump Tweets Crypto Rant — What Is the Bitcoin Reference Really About?

President Donald Trump’s mention of cryptocurrencies is historic, but the blockchain industry deserves a more serious conversation…

Over the last few years, United States President Donald Trump’s tweetstorms have become a peculiar yet amusing feature of American public life. The president’s off-the-cuff comments have served a wide variety of purposes, from enriching political discourse with the mysterious term covfefe to delivering direct threats — furnished with proper capitalization — to the leadership of the nations deemed U.S. adversaries. The most newsworthy rants almost invariably felt improvised, emotional and reactive. However, the historic series of tweets that constituted the first-ever public comment on cryptocurrencies by a sitting U.S. president didn’t seem to fit the same mold.

If anything, the three-prong statement comes across as consistent, strategically timed and unusually well-articulated. It opens with a general critique of cryptocurrencies, then proceeds to extend the punch to Libra, Facebook’s much-discussed prospective digital currency, and concludes with a feel-good declaration lauding the U.S. dollar as the “most dominant currency anywhere in the World.”

The statement, seemingly uncalled for, came days before Libra’s chief, David Marcus, was slated to face Congress in two back-to-back hearings. Earlier on the day, when cryptocurrencies incurred President Trump’s wrath, Jerome Powell, the Federal Reserve’s chair, admitted before the Senate Banking Committee that a globally entrenched cryptocurrency could potentially render existing reserve currencies obsolete.

Finally, four days after Trump’s tweets, Treasury Secretary Steven Muchin echoed the president’s concerns almost verbatim during a press conference during which he contended that cryptocurrencies posed a “national security threat.” At that point, it became difficult not to see the messages coming out of the administration as a coordinated viewpoint.

It is no surprise many in the crypto community came to suspect that the tweets were not Trump’s own. Preston Byrne, a pro-Trump blockchain lawyer, was among the president’s supporters who expressed doubts over the message’s authorship, adding, “This is more likely coming from the Treasury Department — that’d be Secretary Mnuchin — and at the behest in particular of the banks.” The Verge’s Elizabeth Lopatto questioned Trump’s understanding of the subject matter altogether, “I do not believe for an instant that the president could define a cryptocurrency, explain what bitcoin is, or even know what Libra (much less its Association) is supposed to be.”

Immediate response

Whoever had penned the tweets, cryptocurrency prices took a tumble immediately, then bounced upward briefly before entering an even greater hit, flashing red signals all across the market. Although some analysts claimed that it was not President Trump’s remarks that had triggered the reversal, both the timing and steepness of the decline correspond to what one could interpret as a sell-off in the wake of major negative news.

Despite the immediate market dynamics in the aftermath of the tweetstorm, the spirits of many opinion leaders were high. The common theme was that, regardless of the valence of the presidential statement, the sheer fact of mention is a strategic win for the blockchain industry, as more than 60 million of Trump’s followers have become aware of the cryptocurrencies’ existence. Jeremy Allaire, the co-founder and CEO of financial services company Circle, called the development “possibly the largest bull signal for BTC ever” while Forbes’ Billy Bambrough observed that Trump “has inadvertently catapulted bitcoin and cryptocurrencies into a presidential issue and given valuable recognition to the burgeoning bitcoin technology.”

In the short run, though, such a negative introduction could well damage cryptocurrencies’ standing with millions of Americans. Many industry stalwarts, such as Caitlin Long and John McAfee, urged the president to further educate himself on the issue before making strong statements. Nigel Green, the founder and CEO of deVere Group, remarked that discarding digital currencies in the advent of the digital era is a questionable way to go.

Unsurprisingly, the anti-Bitcoin rant cost Trump support of some of his former allies among crypto-loving libertarians and right-wingers. Gab, a social medium notorious for becoming a haven for public figures exiled from more mainstream platforms for the extremity of viewpoints they expressed, tweeted back at the president their defense of Bitcoin as “free speech money.” It remains unknown if President Trump is aware of the existence of this brand of his supporters, maybe someone crypto-friendly who has his ear — e.g., Mick Mulvaney had tipped him off. Yet, it doesn’t seem likely that the president would sacrifice his strategic financial policy messaging in order to make such niche groups feel good.

The importance of “thin air”

Beyond taking issue with the fact of the president’s arguably uninformed criticism, the substance of his claims deserves a thorough rebuttal as well. Granted, there has been no shortage of thoughtful deconstructions offered by the blockchain industry in the days right after Trump’s tweets and his account erupted with the anti-crypto rant.

For sure, as the person with so much influence over the dollar, a sitting U.S. president is in no position to express any kind of public endorsement of what could potentially threaten the dollar’s hegemony as a medium of exchange and a reserve currency. However, the kind of shallow criticism that President Trump offered doesn’t hold any water when faced with any systematic counterargument. Such an outburst does little to advance a much-needed and nuanced conversation about how the incumbent financial system would be reconciled with the emerging realm of crypto finance.

Trump argued that Bitcoin and other cryptocurrencies are not money, as their value is “highly volatile and based on thin air.” Perhaps this is accurate for those who espouse the very narrow (and rather antiquated) definition of money as a unit of value issued by a central government and backed by a nation state’s economy. But it is 2019, and many prominent thinkers adhere to more flexible and broad definitions, which is something to contend with.

In a post for The Merkle, George McDonaugh rightfully observed that what is money and what is not is highly context-dependent, saying “Cigarettes are money in prisons, bullets are money in war zones and bitcoin is money in Venezuela.” Borderless and globally priced, Bitcoin can be money in many ways fiat currencies are not, if given a chance.

Further still, the global reserve currency status is context-dependent as well. As the Western powers butchered each other into poverty and devastation during two world wars, the United States came out on top as the world’s most powerful economy, propelling the dollar to the status of global reserve currency along the way. This is the context, and the context is always subject to change. The value of both USD and Bitcoin is based on trust — they just go about it differently. In many ways, algorithmically maintained trust looks superior to the fragile assumptions that underlie the financial system powered by a $22 trillion debt.

Now, facilitation of crime. The tale is so rusty that, for many crypto aficionados, it has become difficult to go on yet another round of debunking it without rolling their eyes. McAfee chose a classic way to retort: It is true that Bitcoin gave a certain edge to villains for a short time, but so did every consequential invention in history, including, for example, the telephone. As of today, the track record of U.S. law enforcement agencies picking criminals’ traces off blockchains is already impressive, and there is no reason to expect that a future regulation-compliant decentralized digital asset would be any different in this regard.

As The Next Web’s Yessi Bello Perez reminded, most cryptocurrencies are pseudonymous, while cash is anonymous — guess which one is better suited for illicit activities by design? Moreover, when cash is no longer around, centrally issued currencies will surely facilitate financial surveillance of an unprecedented scale, as Coin Center’s Neeraj K. Agrawal aptly pointed out.

All in all, while it is hard to expect anything else than a firm no-coin stance from a public servant tasked with overseeing the U.S. national currency, the set of arguments that Donald Trump recently advanced have several pronounced gaps to take a dig at. Moreover, the ever-expanding blockchain-based financial system is not going anywhere as a result of Trump’s tweets. It will remain right there, close behind the traditional institutions, waiting for The Donald or the next U.S. leader to address it in earnest.

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G7 Approves Japan’s Cryptocurrency-Based SWIFT Alternative

The Japanese government is attempting to spearhead the creation of a new, global cryptocurrency payments network that would be similar to SWIFT.

The Japanese government is attempting to spearhead the creation of a new, global cryptocurrency payments network that would be similar to SWIFT.

Replace SWIFT with a global crypto payments network?

Citing an anonymous source, a Reuters report published on July 18 claimed that the country’s push for the network is motivated by a resolve to combat money laundering more effectively.

While plans are being kept firmly under wraps, the source alleged that Tokyo hopes to have the network established within the next few years. 

Plans for the network were reportedly initially proposed by Japan’s Ministry of Finance and its national regulator, the Financial Services Agency (FSA).

The prospective network has been approved for oversight by the Financial Action Task Force — a G7-initiated intergovernmental organization that promotes legal, regulatory and operational measures that aim to fight money laundering on a global scale. 

As Reuters notes, anti-money-laundering (AML) compliance has loomed large in regulators’, central banks’ and governments’ scrutiny of Facebook’s plans to launch its own stablecoin, dubbed Libra.  

Ahead of this week’s meeting of G7 finance ministers in France this week, Japan had set up a national liaison conference — involving the Bank of Japan, the Ministry of Finance and the FSA — tasked with investigating the impact of Libra on monetary policy and financial stability. 

The G7, cryptocurrencies and the fight against money laundering

France had pre-empted Japan in creating a G7 taskforce that will examine how central banks can regulate cryptocurrencies like Libra.

In June, the FATF revealed plans to strengthen control over crypto exchanges to preclude digital currencies from being used in money laundering and related financial crimes.

This spring, the Japanese House of Representatives officially approved a new bill to amend national laws that govern crypto regulation. The revised acts — which include specific AML measures focused on privacy coins — are set to come into force in April 2020.

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IMF Chief Economist Urges Regulatory Vigilance on Libra

IMF chief economist Gita Gopinath has called on global regulators to be vigilant and take the proper regulatory steps regarding Facebook’s Libra.

The International Monetary Fund (IMF) has called on global regulators to pay attention and take proper regulatory action regarding Facebook’s Libra.

Speaking with Reuters on July 17, Gita Gopinath, chief economist at the IMF, urged the global regulatory community to pay serious attention to Facebook’s crypto project during the early stages of its development. Gopinath emphasized that global financial regulators should act immediately to ensure that they are not too late in taking the necessary measures.

Gopinath outlined the major risks associated with the stablecoin, including concerns about data privacy, consumer protection, as well as “backdoor dollarization.” Still, the IMF economist admitted that Libra could help boost financial inclusion.

Gopinath’s remarks come amid a hearing on Libra at the United States House of Representatives Financial Services Committee. Lawmakers in both the House and the Senate criticized Facebook’s past behavior in regard to data privacy and consumer protection. 

Regulators Already Evaluating the Risks of Libra

Meanwhile, a number of global jurisdictions have expressed their concerns towards Libra and have begun investigating the forthcoming coin. Japanese authorities recently launched an investigation of the impact of Libra on monetary policy and financial stability.

Previously, India’s authorities claimed that the government would not be comfortable with a private cryptocurrency. On July 8, China’s central bank announced it started developing its own digital currency in response to Facebook’s Libra as it could pose a risk to the country’s financial system.

Other authorities are less skeptical. Bank of England governor Mark Carney recently claimed that people need to acknowledge the issues that Facebook is trying to solve with Libra, despite the potential downsides of the project.