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EU Parliament Study: Central Bank Digital Currencies ‘Will Reshape Competition’ in Crypto Market

A study on issues of competition in fintech, commissioned by the European Parliament Committee on Economic and Monetary Affairs (ECON), was published July 20. It found that central bank-issued digital currencies could be a “remedy” for a lack of competition policy in the crypto sector:

“The arrival of permissioned cryptocurrencies promoted by banks, even by central banks, will reshape the current competition level in the cryptocurrency market, broadening the number of competitors.”

The study mentions cryptocurrencies like Bitcoin (BTC) as “technological and operational paradigms that are a source of disruption for the entire sector, including monetary policy and financial stability.” Other “disruptive and innovative applications” of new technologies include “AI, cloud computing, biometrics, digital identity, blockchain, cybersecurity, RegTech, internet of things (IoT), augmented reality.”

Private digital currencies are defined separately from central bank-issued digital currencies (CBDC), noting that the CBDCs differ by being based on a “conventional bilateral settlement with a trusted central party.”

According to the study, since closed cryptocurrency systems require a supervisory authority, central banks could be considering using “permissioned cryptocurrency systems” to “complement or substitute” the currencies already used.

The study claims that CBDCs “will reshape the current competition level in the inter-cryptocurrency market” by adding to the pool of competitors:

“A potential inadequacy of traditional competition policy to address competition issues in the cryptocurrency markets can be found, suggesting direct public participation through a central-bank digital currency as a remedy.”

The competition issues, the ECON study notes, can be divided into “inter-cryptocurrency market” competition between cryptos, and “intra-cryptocurrency” market competition between service providers like wallets and exchanges.

In terms of “inter-crypto market” competition, the study reports that the “presence of network effects” and a high number of users of a cryptocurrency could provide a barrier to entry for other cryptos attempting to join the market. The study hypothesizes that this competition “may lead to potential collusive agreements between members of hypothetical cartels.”

For “intra-crypto market” competition, wallets, exchanges, and payment providers could create practices that would keep others out of the market, such as receiving inducements from miners that favor one cryptocurrency over another.

In mid-July, a new EU directive came into force that set stricter transparency rules for digital currencies to protect against money laundering and terrorist financing.

Also in July, virtual currencies were discussed for the first time at ECON’s “Monetary Dialogue” session, with five different briefing reports discussed on topics ranging from crypto and central banks to crypto and the “Eurosystem.”

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Crypto Wallets, Explained

What is a crypto wallet?

A crypto wallet is a piece of software that enables you to send and receive cryptocurrencies, such as Bitcoin.

They can be used to store multiple tokens and coins at once – however, most wallets will only support a limited number of cryptocurrencies.

Wallets are used to store something known as private keys: long hexadecimal codes known only to you and your wallet. They must match with a public key so you can spend your money.

Wallets come in many forms. They can be stored on hardware which is occasionally connected to the web to perform transactions (some people keep them in bank vaults the rest of the time) – you can even write the keys down on a piece of paper, which is one method of “cold storage.”

Hosted wallets are akin to traditional banking apps. You can access your balance on multiple devices, and your funds aren’t gone forever if you lose your phone or forget your password.

So what are the steps involved with creating a wallet?

Firstly, have a think about how you want to access your wallet.

Are you going to be using your mobile phone? A desktop computer? Do you want to log into a website, or use hardware which stores your keys offline? Some wallets do not work across all platforms, so this is important to bear in mind.

Next, determine whether the wallet you’re planning to use supports the cryptocurrencies that you invest in – and make sure that it’s reputable and trustworthy.

Most wallet providers offer a step-by-step guide for using their app, and the process isn’t too dissimilar from setting up an email address. It’s worth creating a back-up of your password private key and storing it safely.

Could I get in trouble for having a crypto wallet in my country?

A handful of countries have imposed laws against cryptocurrency – with others warning that regulation will be coming soon.

Bitcoin is banned in Pakistan, Nepal, Algeria, Cambodia and Bolivia – and it is illegal to pay in Bitcoin in Macedonia, Vietnam and Bangladesh.

Ecuador has also banned cryptocurrencies but plans to launch its own in the future.

If the company knows my private keys, can they steal my crypto?

Third-party wallets can be a great way to store cryptocurrency, but you need to do your due diligence first.

In theory, a company could use the private keys you have entrusted in them to steal your funds. There have also been cases where users have been unable to withdraw funds from their wallets, with those providers subsequently collapsing.

Look for established wallets which offer cutting-edge technology to protect what’s in your wallet. Given there are loads of options around, read reviews and explore the pros and cons of each provider – that way, you’ll make an informed decision.

What can I do to keep my crypto safe?

Try to use cold storage options wherever possible, especially if you are saving cryptocurrency for a rainy day. Hot storage is ideal when you are trying to create a “checking” account where funds can easily be accessed for transactions.

The first tip is to be on your guard for malicious software which can compromise security on your laptop or phone.

Second, if you are using a hosted wallet provider, always be vigilant if you receive emails which claim to be from them. A genuine message will usually contain information only they would know. “Phishing” emails from fraudsters often imitate the logos and language used by official companies to lure you into a false sense of security. Looking closely at their address can uncover clues such as small typos or a different domain, turning noreply@coineth.com to no_reply@coinneth1.io.

I’ve been sent crypto but my wallet is empty! How long does it take?

This depends on how quickly confirmations are completed on the blockchain.

It can vary between transactions, and also between cryptocurrencies.

The standard for Bitcoin is six confirmations before a transfer is complete, and this process can take about an hour depending on how much network activity there is.

Other cryptocurrencies may require a greater number of confirmations, but this doesn’t necessarily mean the transaction will be slower. For example, although 24 confirmations are required on Ether, a deposit can be completed within minutes.

I had funds in my account but now I’m on zero. Where did my money go?

This may be because your coins have been transferred to cold storage.

Some hosted wallet providers move funds out of a pay-in address and into cold storage to keep their users’ keys and personal assets safe.

When these users want to make a payment, their assets are then transferred from cold storage to their desired pay-out address.

Will I get new coins in the event of a blockchain fork?

Forks can be used to launch new coins on hosted wallets. It can take a while for them to be supported, and sometimes, crypto wallets will not support forks at all.

Usually, developers behind hosted wallets will analyze these forks, and where possible, will check a new chain for pre-mining or other suspicious behavior. If there is no evidence of this, it is likely that the hosted wallet will support the fork – and customers who already hold coins will be credited with the new asset.

This process isn’t always slow. For example, Freewallet released a Bitcoin Cash wallet two days after the Bitcoin fork and provided new coins for users. The hosted wallet became the first provider to support the fork.

 

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.

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Luxury Car Dealer Teams with BitFlyer for Big Bitcoin Payments

L’Operaio, a Japanese car dealership that imports and sells high-end vehicles, is adding bitcoin as a payment option with technological support from the country’s largest exchange, bitFlyer.

Notably, while most of the exchange’s existing retail partnerships have a limited settlement cap for each purchase, ranging from $900 to $2,760, bitFlyer says the new partnership will allow customers to make purchases as high as 100 million yen ($1 million) in bitcoin via its digital wallet.

Announced by bitFlyer on Tuesday, the initial phase of the partnership will see bitcoin payments being made available at the dealer’s stores at Nerima, Setagaya, and Aoyama in Tokyo, with plans being to expand the option to all stores in the future.

As reported before, bitFlyer has already integrated its cryptocurrency wallet with major electronics retailers in Japan, such as all stores at Bic Camera and selected branches of Yamada Denki.

Last year, department store operator Marui also rolled out a trial of bitcoin payments in conjunction with bitFlyer at one of its locations in Shinjuku, Tokyo.

Sports car image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Canadian Financial Regulator Warns Of Potential Scam, Unregistered “Cryptobank” ICO

New Brunswick, Canada’s financial watchdog warned cryptocurrency investors of a potential scam website Bitcoin-bank.io that claims to be a “cryptobank” in an investor alert published Monday, Feb. 5.

According to the statement, the Financial and Consumer Services Commission (FCNB) started investigating the company profile after Bitcoin-bank.io appeared in ads on a Canadian online classified website. FCNB found that the company is neither registered  for trading in New Brunswick, nor for advising on securities or derivatives, despite the fact that it claims to provide these services in the province.

On its website, Bitcoin-bank.io offers “Cryptobanking at its Best” services, such as payment card and cryptocurrency wallet solutions. The website also promote its own ongoing Initial Coin Offering (ICO), with one BTCB coin ‘starting’ at 0.000975 Bitcoin (BTC).

In its Whitepaper, the Bitcoin-bank.io team notes that the platform is geared towards newcomers in the cryptocurrency space, and does not require any previous trading skills to use:

“It is a perfect platform for those who wants [sic] to have a passive income on daily basis without having to learn the related crypto or trading skills or the time to watch the markets all day long.”

FCNB also reported that the company is not registered at the California address listed on its website. Moreover, according to the report, the list of the company employees consists of fake names with attached photographs taken from other websites and copied content.

Last month, Canadian securities regulators approved the launch of the country’s first Blockchain-based Exchange Traded Fund (ETF), Harvest Blockchain Technologies Index (HBLK).

In December 2017, researchers at the Bank of Canada released a report examining the feasibility of launching a state-issued Blockchain-based digital currency, the “central bank digital currency” (CBDC).

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Visa, Worldpay Take Blame For Duplicate Charges On Coinbase, Reverse Transactions

Visa and payment processing company Worldpay issued a joint statement on the Coinbase blog today, Feb. 17, taking responsibility for charging Coinbase customers multiple times for the same transaction.

Before admitting fault in the statement published by Coinbase today, Visa had at first shifted the blame back to Coinbase, telling the Financial Times on Feb. 16 that it had “not made any systems changes that would result in the duplicate transactions cardholders are reporting.”

However, the latest statement from Visa and Worldpay on the Coinbase blog clarifies:

“Over the last two days, some customers who used a credit or debit card at Coinbase may have seen duplicate transactions posted to their cardholder accounts. This issue was not caused by Coinbase.

Coinbase has stated the error initiated from a change of the merchant category code (MCC) for crypto purchases earlier this month, which meant that crypto payments by card would be processed as “cash advances”. Coinbase reported Feb. 15 that the extra charges were a result of Visa reversing and recharging transactions due to the MCC code change.

Visa and Worldpay write that all of the reversal transactions should have been issued, and will be reflected in the customers’ account balances within a few days. Their statement concludes:

“If you continue to have problems with your credit or debit card account after this reversal period, including issues relating to card fees or charges, we encourage you to contact your card issuing bank. We deeply regret any inconvenience this may have caused customers.”

Brian Armstrong, CEO and co-founder of Coinbase, tweeted that he was “glad to see the record set straight on this”, attaching Visa and Worldpay’s joint statement:

The credit and debit card issues on Coinbase come after a slew of major banks around the world banned credit card purchases of cryptocurrencies, and in some cases debit card purchases, starting earlier this month.

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Accidental Charges Lead To Coinbase Users Losing Thousands Of Dollars, Refunds Promised

Crypto wallet and exchange Coinbase has admitted that some customers were erroneously overcharged for credit and debit purchases of crypto, and promises to reimburse all affected customers in full, the Coinbase blog reports Thursday, Feb. 15.

According to Coinbase, the problem was initiated when banks and card issuers changed the merchant category code (MCC) for crypto purchases earlier this month. This meant that crypto payments would now be processed as “cash advances,” meaning that banks and credit card issuers could begin charging customers “cash advance” fees for crypto purchases.

Coinbase wrote on their Reddit page at 6:00pm PST that the extra charges were a result of Visa reversing and recharging transactions due to the MCC code change. Their Reddit update adds that Coinbase is working with Visa and other major credit card network to create a new MCC for crypto purchases, and that they “hope that this will not have additional ‘cash advance’ fees” for customers.

Comments on Coinbase’s blog reflect the frustration of customers affected in a larger way when the multiple charges made to their Coinbase account led to overdrafts of their bank accounts. Medium user Sam Yoo writes,

“Are you going to refund the overdraft fees that were incurred from this fiasco?”

Reddit user Ipzi posted on Coinbase’s Reddit page that he was charged with 50 duplicate charges for a total of $67,000.

The Coinbase blog writes that any customers who purchased crypto on their exchange between Jan. 22 and Feb. 11 could have been affected. Any Coinbase customer that has been affected by extra charges is asked to report to Coinbase in order to help them track down what exactly occured.

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Newly Discovered Vulnerability In All Ledger Hardware Wallets Puts User Funds At Risk

Hardware cryptocurrency wallet manufacturer Ledger has discovered a vulnerability that affects all of its devices and can lead to users losing their funds, according to a report released on Saturday, Feb. 3.

According to the report, а “man in the middle” attack can be performed when the user attempts to generate an address to receive bitcoins to their Ledger wallet. If the computer that is used in this process is infected by malware, the attacker can secretly replace the code responsible for generating the address, causing “all future deposits to be sent to the attacker.”

How to protect yourself

Fortunately for the owners of their wallets, Ledger has also revealed how to avoid the “man in the middle” attack. According to the report, users should take advantage of an “undocumented” feature of the wallet that displays the receiving address on the wallet’s physical display.

Interface

By clicking the monitor button at the bottom left of the “Receive Bitcoins” menu and confirming the address on the hardware wallet’s display every time they generate a new one, users can ensure that the address has not been tampered with.

The report further indicates that this feature is not mandatory and is not enforced by Ledger’s own interface, placing the ultimate responsibility for the safety of the funds on users themselves.

Hardware wallets are regarded as one of the safest ways to store cryptocurrencies, as opposed to holding them on an online exchange or wallet.

However, with Ledger’s over one million users affected by the newly discovered vector of attack, it becomes clear that even having a hardware wallet does not “make you invincible,” in the company’s own words.

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Hardware Bitcoin Wallets Not Vulnerable to Spectre Attacks, Funds Safe

Trezor and Ledger, two of the most widely utilized cryptocurrency hardware wallets, have reaffirmed that the recently discovered vulnerabilities on CPUs and the latest Spectre attacks have not affected hardware cryptocurrency wallets.

Hardware wallets not vulnerable

As Cointelegraph previously reported, Pavol Rusnak, the chief technical officer at Satoshi Labs, the parent company of Trezor, wrote:

“As more people are asking: @TREZOR is not vulnerable to recent Meltdown and Spectre hardware attacks, because it has processor not affected by these. Also our firmware is always signed, so the device never runs untrusted code. Using a hardware wallet is now more important than ever.”

Rusnak emphasized that users should rely on hardware wallets at this specific period of time, because Spectre attacks have drastically impacted the cloud services on which many cryptocurrency exchanges and wallet platforms operate. Earlier today, several cryptocurrency exchanges including Bittrex were taken offline due to the vulnerabilities found in Intel CPUs. These weaknesses affected Azure cloud services offered by Microsoft, and by extension, the exchanges hosted on Azure.

New York Times cybersecurity journalist Nicole Perlroth wrote:

“Meltdown and Spectre show that it is possible for attackers to exploit these design flaws to access the entire memory contents of a machine. The most visceral attack scenario is an attacker who rents 5 minutes of time from an Amazon or Google or Microsoft cloud server and steals data from other customers renting space on that same cloud server.”

Safekeeping of funds

Hardware cryptocurrency wallet developers and Bitcoin experts have recommended users to move their funds from centralized online platforms to hardware wallets. Jonas Schnelli, a Bitcoin Core developer, stated:

“The current privileged memory side channel attacks just confirms what many Bitcoin users already know. Don’t trust your PC. Don’t think applications (and private keys) are shielded. Use a hardware wallet.”

Unlike exchanges, hardware wallets are non-custodial wallets that allow users to remain in full control over their private keys. When users initialize their hardware wallet, they write down 12 – 24 words which comprise a backup for their seed. With this backup, even if the wallet platform gets hacked, users can obtain their funds and move them to another wallet or paper wallets.

But centralized trading platforms and wallets store private keys on behalf of their users. The result is a centralization of private keys, creating a significant security issue.

Don’t use wi-fi

The Ledger development team released a detailed blog post as to why hardware cryptocurrency wallets are not at risk due to Intel, AMD and ARM CPU vulnerabilities. The company wrote:

“Ledger’s devices are not affected by these attacks. First of all, to exploit these flaws, the attacker has to be able to run arbitrary code. As long as you only use Ledger’s embedded apps (which is strongly recommended), your Nano S / Blue is not vulnerable to these kind of attacks.”

Most importantly, because any modern machine is affected by the Spectre vulnerabilities, it would be wise not to use Wi-Fi while sending and receiving cryptocurrencies.

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Bitcoin Wallets Could Reduce Bitcoin Fees Immediately For Users, Here's How

Zebpay, the most widely utilized Bitcoin exchange and wallet platform in India, discovered that most Bitcoin wallets are utilizing inefficient methods of estimating Bitcoin fees, leading to higher fees for users. In an analytical column, the Zebpay team explained that Bitcoin exchanges and businesses tend to overpay Bitcoin fees on behalf of their users to prevent bad user experience and transactions from being stuck. Zebpay explained:

“The cost of customer support in case of a stuck transaction is higher than the actual fees of transaction. Other Bitcoin exchanges/businesses that use hosted wallets like us will try to pay higher fees competing with everyone to make sure their transaction goes through. This competition during a clogged mempool makes prediction of fees even more complicated adding to the uncertainty of block confirmations.”

Consequently, users on many wallets pay higher transaction fees than necessary to ensure their transactions are included in a block.

Over the past few weeks, with the help of BitGo Engineer Jameson Lopp and Security Expert Andreas Antonopoulos, the Zebpay engineering and development teams focused on implementing three systems: slab-wise fees, batch transactions and Segregated Witness (SegWit). These changes ensure that small transactions require lower fees while larger transactions pay higher fees.

In countries like China, India and the Philippines that process billions of dollars in remittances every year, many use Bitcoin to make such payments. This results in small transactions being made on a regular basis. However, it becomes difficult to use Bitcoin to send payments in a peer-to-peer manner if fees exceed $5. In the Philippines, minimum wage is about $7.32 per day, according to the National Wages and Productivity Commission. On a monthly basis, users in the Philippines and other countries like India send payments in the range of $200 to $400.

The slab-wise fee system allows the Zebpay wallet platform to attach fees based on the amount of the transactions rather than their size. As such, users sending transactions in the $200 to $400 can prevent from attaching $15 to $30 fees for their payments. The Zebpay team explained:

“In this way, people transacting lower amounts would pay lower fee and people transferring higher amounts would pay higher fee which would subsidize transfers of lower amounts. For smaller transactions, we use smaller number of UTXOs which result in smaller transaction size.”

Zebpay also noted that through batch transactions, the platform is able to attach a high fee for one transaction in a large batch of transactions and still have all of the transactions confirmed.

“We batch all transactions every five minutes and create one transaction that would take one input from our hot wallet and the outputs would contain all the addresses that users wanted to transfer to.”

Other wallet platforms can adopt a similar system and integrate better fee estimation methods to decrease fees and clear transactions more efficiently.

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Hypnosis the Answer to Forgotten Wallet Passwords?

Imagine this scenario. January 2013, you buy 100 Bitcoins for $1300 not thinking too much about the new cryptocurrency and the small amount of money you’ve spent.

Fast forward five years and you realise your 100 Bitcoin are now worth $1.3 mln. But you have forgotten the password to your Bitcoin wallets – denying you access to your million dollar fortune.

It would be a nightmare of epic proportions. You’d probably rather face Jason from Friday the 13th than not be able to access your Bitcoin wallet.

But if you live in Russia, you could pay a hypnotist to help you remember your password and claim your little pile of digital gold.

According to RT, a hypnotist in Russia is charging one Bitcoin to help users remember their lost passwords. If you unlock your wallet, you are also liable to pay five percent of the amount of Bitcoin you recovered in your stash.

Denis Derkach, who runs a Russian advertising platform serving cryptocurrency websites, says people will do almost anything to access their lost accounts.

“With the skyrocketing Bitcoin many of those who once bought Bitcoin as a toy are now kicking themselves. They are appalled to see that they could become dollar millionaires if only they remembered the password.”

Veronika Marymur is the hypnotist who has helped almost half of her 20 clients to remember their lost Bitcoin wallet passwords:

“With the help of hypnosis, I bring a person into an altered state of consciousness when he can recall the information he needs.”

Many people have lost Bitcoin through a number of weird, wonderful and ultimately tragic ways. From burned hard drives to straight-forward hacks, any story of lost Bitcoin is hard to read.