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Bitstamp Commitment to Bitcoin Scalability, Launching a Lightning Network Node

Bitstamp Lightning Network Node

The Lightning Network (LN), Bitcoin’s
most significant off chain scaling protocol is now available to the Bitstamp
community. The European cryptocurrency exchange has announced
the set up of a Lightning Network node.

In the July 8 announcement, the crypto
exchange said:

 “Bitstamp has been supporting the Bitcoin industry since its early days. By running our own Lightning Network node, we want to help the network grow and encourage other companies to start working with this amazing technology as well.”

In addition, the exchange affirmed its
belief in LN, saying:

 “We believe that there are use cases for Lightning in almost any industry. Let’s start discovering them”.

Status of Lightning Network

The Bitcoin [BTC] Lightning Network is
enjoying increased capacity on the back of the current BTC Bull Run.
Consequently, the number of nodes on the protocol now stands at 9,009 with 34,286 channels. As per BitcoinVisuals data, one exact
year ago, the network had 1,526 nodes. Its network’s BTC capacity is at 946.02
BTC a sharp rise from the 21.426 BTC capacity a year ago. The steady growth of
the second layer payment protocol has its enthusiasts very excited and with
good reason.

The protocol is Bitcoin’s most
contentious Layer 2 solution. For BTC bulls that will not entertain any hard
forks or alterations to the BTC blockchain, it is the hope for the digital
asset’s scalability problem. The LN was designed to improve the blockchain’s
performance and halt threats to raise its 1MB capacity to 32MB.

Through it, the otherwise slow and
expensive transactions can assume per second speeds at negligible fees. This
could give the digital asset possibilities beyond the reach of fiat.

More Lightning Network Nodes Equal Sustenance

Its critics, however, are skeptical of
the much-vaunted scaling solution’s mass usage. In March, for instance, when
its capacity decreased from a high of 1000 BTC, there was an uproar. The drop
was caused by LNbig’s closure of some channels. The provider had been
responsible for 25 percent of the liquidity on the network. On Reddit, LNbig encouraged more
players to open channels, run more nodes, and increase the liquidity on the
network.

The success of the Bitcoin Lightning Network is, therefore, highly dependent on increased levels of liquidity from more active nodes. At the moment many channels are running on LN as benefactors.

However, the solution cannot scale on
perpetual benevolence. Bitstamp’s nodes are, accordingly, one more positive
development for the scaling solution. 
The nodes are the Lightning Network’s basic building units, which in the
end will increase its capabilities.

LN has also become available to Coinbase through Bitrefill.  Bitfinex also has revealed plans to launch LN support for Tether’s USDT stablecoin. There also have been reports that crypto payments processor startup Moon has a web browser in place to enable Lightning BTC wallets to purchase items on Amazon.

A failed LN would be a victory for Bitcoin hard forks like Bitcoin Cash. BTC users in search of a more scalable digital asset would be tempted to join the speedier digital assets.

The post Bitstamp Commitment to Bitcoin Scalability, Launching a Lightning Network Node appeared first on Ethereum World News.

Posted on

Bitstamp’s Commitment to Bitcoin Scalability, Launching a Lightning Network Node

Bitstamp Lightning Network Node

The Lightning Network (LN), Bitcoin’s
most significant off chain scaling protocol is now available to the Bitstamp
community. The European cryptocurrency exchange has announced
the set up of a Lightning Network node.

In the July 8 announcement, the crypto
exchange said:

 “Bitstamp has been supporting the Bitcoin industry since its early days. By running our own Lightning Network node, we want to help the network grow and encourage other companies to start working with this amazing technology as well.”

In addition, the exchange affirmed its
belief in LN, saying:

 “We believe that there are use cases for Lightning in almost any industry. Let’s start discovering them”.

Status of Lightning Network

The Bitcoin [BTC] Lightning Network is
enjoying increased capacity on the back of the current BTC Bull Run.
Consequently, the number of nodes on the protocol now stands at 9,009 with 34,286 channels. As per BitcoinVisuals data, one exact
year ago, the network had 1,526 nodes. Its network’s BTC capacity is at 946.02
BTC a sharp rise from the 21.426 BTC capacity a year ago. The steady growth of
the second layer payment protocol has its enthusiasts very excited and with
good reason.

The protocol is Bitcoin’s most
contentious Layer 2 solution. For BTC bulls that will not entertain any hard
forks or alterations to the BTC blockchain, it is the hope for the digital
asset’s scalability problem. The LN was designed to improve the blockchain’s
performance and halt threats to raise its 1MB capacity to 32MB.

Through it, the otherwise slow and
expensive transactions can assume per second speeds at negligible fees. This
could give the digital asset possibilities beyond the reach of fiat.

More Lightning Network Nodes Equal Sustenance

Its critics, however, are skeptical of
the much-vaunted scaling solution’s mass usage. In March, for instance, when
its capacity decreased from a high of 1000 BTC, there was an uproar. The drop
was caused by LNbig’s closure of some channels. The provider had been
responsible for 25 percent of the liquidity on the network. On Reddit, LNbig encouraged more
players to open channels, run more nodes, and increase the liquidity on the
network.

The success of the Bitcoin Lightning Network is, therefore, highly dependent on increased levels of liquidity from more active nodes. At the moment many channels are running on LN as benefactors.

However, the solution cannot scale on
perpetual benevolence. Bitstamp’s nodes are, accordingly, one more positive
development for the scaling solution. 
The nodes are the Lightning Network’s basic building units, which in the
end will increase its capabilities.

LN has also become available to Coinbase through Bitrefill.  Bitfinex also has revealed plans to launch LN support for Tether’s USDT stablecoin. There also have been reports that crypto payments processor startup Moon has a web browser in place to enable Lightning BTC wallets to purchase items on Amazon.

A failed LN would be a victory for Bitcoin hard forks like Bitcoin Cash. BTC users in search of a more scalable digital asset would be tempted to join the speedier digital assets.

The post Bitstamp’s Commitment to Bitcoin Scalability, Launching a Lightning Network Node appeared first on Ethereum World News.

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Major Coins See Red Following Reports That FOMO Fueled May’s Rally

Bitcoin and Ether are in the red, Ripple is in the green. Top 50 cryptocurrencies are mostly in the red in a more uncertain crypto market.

Thursday, June 6 — Bitcoin (BTC) and ether (ETH) are trending down slightly following the slump from the recent rally. Top cryptocurrencies are seeing a mix of ups and downs, according to data from Coin360.

Market visualization courtesy of Coin360

Market visualization courtesy of Coin360

After its surge to $9,000 last week, BTC is down by 1.67% on the day, and is trading at just $7,676 according to CoinMarketCap. The leading cryptocurrency has fallen in market capitalization by about $10 billion since May 30, with a market cap of approximately $136 billion at press time.

Bitcoin 7-day price chart

Bitcoin 7-day price chart. Source: CoinMarketCap

Top altcoin ETH is currently down by 1.8% and is trading at $241.77 at press time. With the recent market adjustments, ETH currently has a market cap approximately 19% the size of Bitcoin’s.

Ether 7-day price chart

Ether 7-day price chart. Source: CoinMarketCap

Ripple’s token XRP, however, is trending up by 2.32% on the day, and is trading at $0.408.

XRP 7-day price chart

XRP 7-day price chart. Source: CoinMarketCap

The total market capitalization of all cryptocurrencies is currently at $243 billion. 24-hour trade volume is $62.3 billion.

Total market capitalization of all cryptocurrencies 24-hour price chart

Total market capitalization of all cryptocurrencies 24-hour price chart. Source: CoinMarketCap

Looking at the data provided by MarketWatch, gold is in the green, trading at around $1,342.40, up by 0.66% on the day. Oil, on the other hand, is down by .21% on the day, trading around $51.57 at press time. Aside from oil, however, other traditional assets listed on the website remain in the green.

As previously reported on Cointelegraph, investment advisory group San Francisco Open Exchange (SFOX) released a volatility report on June 6, saying that the crypto market has transitioned from “mildly bullish” to “uncertain.” SFOX cautioned that the bullish growth in May could have been unsustainable growth due to investor FOMO (fear of missing out).

In the report, SFOX conjectured that bitcoin’s major rally on May 13 might have been the result of the on-going trade war between the United States and China. It also noted that the “flash crash” on May 17 may have been the result of a sale on cryptocurrency exchange Bitstamp, in which 5,000 BTC was sold significantly below market value at $6,200.

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Hodler’s Digest, May 13–19: Top Stories, Price Movements, Quotes and FUD of the Week

Bitstamp processed a very large sell order, while Bakkt’s bitcoin futures should be tested in July.

Top Stories This Week

Coming every Sunday, the Hodler’s Digest will help you track every single important news story that happened this week. The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions, and much more — a week on Cointelegraph in one link.

Bitstamp Starts Investigation After Large BTC Sell Leads to $250 Million Liquidated on BitMEX

Major crypto exchange Bitstamp launched an investigation this week after a large bitcoin (BTC) sell order heavily impacted its order book. Bitstamp reported on the execution of the large bitcoin sell order from BTC to United States dollars, without specifying themselves the details of the transaction. Other crypto media noted that it involved a sell order that led to a liquidation of $250 million long positions on the BitMEX exchange with 5,000 BTC sold at $6,200, which further resulted in price declines on other crypto exchanges. Some crypto commentators suggested that the sell order could be made by mistake, with the order’s owner having meant to sell his/her bitcoin at $8,200 instead of $6,200.

Flexa Launches App Where Shoppers Can Spend Crypto at 15 Major U.S. Retailers

Payments startup Flexa unveiled an app this week that allows consumers to spend cryptocurrencies at major American retailers. The app, called Spedn, is currently set up to work with retailers including Barnes & Noble, Bed Bath & Beyond, GameStop, Lowe’s, Nordstrom, Office Depot and Whole Foods Market, with more stores to be added in the coming months. Stores that aren’t able to accept cryptocurrency will require the crypto to be instantly converted to fiat when an item is purchased. As of now, purchase on Spedn can be made with bitcoin, ether (ETH), bitcoin cash (BCH) as well as the gemini dollar (GUSD) stablecoin.

U.S. SEC Delays Decision on Bitwise Bitcoin ETF, Seeks Public Comment

The U.S. Securities and Exchange Commission (SEC) has again delayed its decision to approve or disapprove cryptocurrency index fund provider Bitwise Asset Management’s bitcoin (BTC) exchange-traded fund (ETF) application. In this week’s filing, the SEC also noted that it requested public comment from interested parties, asking for “written submissions of their views, data, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal.” Bitwise had initially filed for an ETF in February, under the condition that the SEC would reach a decision in 45 days, with its application differing from others in that it draws prices from a variety of cryptocurrency exchanges, with the aim of better representing the market.

Bakkt to Roll Out First Bitcoin Futures Testing in July 2019

Institutional crypto exchange Bakkt plans to roll out testing for bitcoin futures trading in early July 2019, according to its CEO, Kelly Loeffler. Loeffler noted in a Medium post this week that Bakkt is working with both the Intercontinental Exchange (ICE) Futures U.S. exchange and ICE Clear U.S. clearing house to prepare the first testing of bitcoin futures trading and custody. In the announcement, Bakkt noted that it has been working with the U.S. Commodity Futures Trading Commission in order to be compliant with federal regulations, as well as to meet major requirements in terms of investors protection. Bakkt was first introduced in August 2018, with the stated goal of offering physically backed bitcoin futures.

EBay Denies Rumors It Will Start Accepting Crypto, Despite Advertising at Crypto Event

EBay has denied rumors after Blockchain Week that it is going to start accepting cryptocurrency as a payment method. Rumors have mounted that the online retail giant would be offering crypto as a payment option since ads were shown at crypto conference Consensus stating: “Virtual currency. It’s happening on eBay.” However, it does currently have a section marked Virtual Currency, where people can use traditional monetary forms to purchase crypto from sellers. In response to the rumors, an eBay spokesperson said that “cryptocurrency is not accepted as a form of payment on the eBay platform, nor is it part of our payments strategy.”

Winners and Losers

The top three altcoin gainers of the week are ultra coin, icechain and pwr coin. The top three altcoin losers of the week are segwit2x, blockport and sharpe platform token.

For more info on crypto prices, make sure to read Cointelegraph’s market analysis.

Most Memorable Quotations

“The more interaction, and willingness that people want to engage with us, the happier we are because we want this to work. We want there to be innovation in these markets. We want there to be change.”

Amy Starr, chief of the office of capital markets trends at the U.S. SEC

“It is a useless currency, that’s what I believe. Look, I realize that people have different opinions, but to me, it’s garbage.”

Shark Tank’s Kevin O’Leary

“In a small number of months, we should have a fully operational testnet and possibly, by the end of this year we’ll have a fully operational phase 0 Ethereum 2.0.”

Joseph Lubin, Ethereum co-founder

“I believe that there are use cases that makes sense today, we have yet to find them at scale in financial services. We’re experimenting heavily, we have more patents than any other financial institution in the blockchain space, but have yet to find something that makes a difference for our clients or our customer.”

Catherine Bessant, chief technology officer at Bank of America

“There is a broad discussion in Washington around 5G being dominated by foreign firms and the U.S. being reliant on foreign technology and foreign expertise. […] With blockchain and crypto, I think there’s a recognition now that these will be part of our future infrastructure. […] It’s important both for national security and from an economic perspective, that the U.S. is a leader in that.”

Ryan Zagone, Ripple’s Director of Regulatory Relations

Prediction of the Week

Joseph Lubin on Ethereum 2.0: ETH to Become 1,000 Times More Scalable Within 24 Months

Joseph Lubin, Ethereum co-founder, said in an interview with Cointelegraph this week that the Ethereum blockchain will become about 1,000 times more scalable in 18 to 24 months. In the interview, Lubin noted that Ethereum 2.0, also called Serenity, will be responsible for bringing the drastic scalability increase to the ecosystem. The development, which Lubin noted is divided into four phases, already has eight groups developing clients for the new chain. He explained that there are several ways in which the new chain could be connected with the old one, noting “there may be bidirectional mechanisms” in moving ether (ETH) tokens from the old chain to the new chain.

FUD of the Week

Floyd Mayweather and DJ Khaled Escape Lawsuit Brought by Defrauded ICO Investors

High-profile boxer Floyd Mayweather and music producer DJ Khaled were dismissed this week from a lawsuit brought by investors in a fraudulent initial coin offering (ICO). The two celebrities had been involved in promoting Centra Tech’s ICO, and had originally been charged last November with unlawfully advertising the aforementioned ICO. This week, a judge ruled that the investors who had brought the legal action against the ICO had not proven that they had bought tokens as a direct result of the pair’s actions. In the settlement where neither of the parties admitted to nor denied the charges against them, Mayweather was fined more than $600,000, while Khaled was fined more than $150,000.

Tron Co-Founder and CTO Leaves Project, Alleging Excessive Centralization

Lucien Chen — the former chief technical officer and co-founder of blockchain protocol Tron — announced that he is leaving the project, citing an excessive centralization. In his announcement, Chen noted that in spite of the project’s success, irreconcilable contradictions between himself and co-founder Justin Sun have led him to choose to leave Tron. In the post, Chen noted that Tron is no longer staying true to its founding principle of decentralizing the web, critiquing Tron’s delegated proof-of-stake (DPoS) consensus mechanism and Super Representative governance and block production nodes.

Hacked New Zealand Exchange Cryptopia Appoints Liquidators, Trading Suspended

Hacked New Zealand-based cryptocurrency exchange Cryptopia said this week that trading was suspended and it was appointing liquidators. The exchange specifically said that it has appointed David Ruscoe and Russell Moore from consultancy and audit firm network Grant Thornton New Zealand as the aforementioned liquidators. In mid-January of this year, Cryptopia had said that it was the target of a security breach resulting in significant losses. According to the liquidators, the exchange decided to go into liquidation, as it has been unable to return the business to profitability, notwithstanding management’s reported efforts to reduce costs. The liquidators plan to conduct an investigation with the aim of securing assets for the benefit of the stakeholders.

Best Cointelegraph Features

Major Crypto Exchange in Korea Shut Down in April: 2018 Was a Nightmare for Most

Joseph Young explains what’s been happening with South Korean cryptocurrency exchanges, as they suffered through a freeze on accepting new registrations as well as the overall bear market.

What Crypto Exchanges Do to Comply With KYC, AML and CFT Regulations

Since most altcoins require crypto enthusiasts to purchase them via cryptocurrency exchanges, Cointelegraph takes a look at how these exchanges work with Anti-Money Laundering (AML), Know Your Customer (KYC) and Combating the Financing of Terrorism (CFT) regulations to ensure both safety and regulatory compliance.

Blockchain as Key to Vienna’s Digital Future — Interview with Ulrike Huemer, CIO of Vienna, Austria

Cointelegraph’s German division spoke with the chief information officer of Vienna’s digital future initiative about the ways the city can evolve to integrate more emerging technologies, including, of course, blockchain.

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Bitstamp Starts Investigation After Large BTC Sell Leads to $250 Mln Liquidated on BitMEX

Bitstamp executed a large sell order on a BTC/USD trading pair, which resulted in a 20% bitcoin price decline on the platform.

Major crypto exchange Bitstamp has launched an investigation after a large bitcoin (BTC) sell order heavily impacted its order book, as the firm announced in a tweet on May 17.

Bitstamp reported an execution of a large sell order in BTC to United States dollars (USD) on its platform today, as the exchange wrote earlier today.

While the company has not specified the details of the transaction, the price of bitcoin had plummeted about 20% from around $7,800 to as low as $6,250 in less than 30 minutes earlier on the day, according to data from trading analytics platform TradingView. Briefly after the crash, bitcoin’s price has surged back, but stabilized below $7,400.

Bitstamp reported that their platform was operating properly as designed.

BTC/USD chart on Bitstamp on May 17

BTC/USD chart on Bitstamp on May 17. Source: TradingView

According to crypto news outlet The Block, the sell order on Bitstamp led to a liquidation of $250 million long positions on the BitMEX exchange, which further resulted in price declines on other crypto exchanges.

As reported by crypto publication Forklog, the sell order on Bitstamp included 5,000 bitcoins sold at $6,200. Some people in crypto community suggested that the sell order could be made by mistake, with the order’s owner having been meant to sell his bitcoin at $8,200 instead of $6,200.

Bitcoin is down around 10% over the past 24 hours to trade at $7,166 at press time after trading at around $7,800 yesterday, while 19 out of the top 20 cryptos by market cap are seeing major losses, according to data from CoinMarketCap.

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What Crypto Exchanges Do to Comply With KYC, AML and CFT Regulations

Top fiat-to-crypto exchanges are adopting market surveillance technologies. Of all crypto-to-crypto exchanges, only Binance has one.

While it’s possible to buy top cryptocurrencies like bitcoin (BTC) and ether (ETH) in the over-the-counter (OTC) market, most people will need an exchange in order to buy other altcoins. Exchanges are simply an important component of the system that makes the crypto market tick. Regulators around the world have identified this, which is why regulatory moves have primarily targeted exchanges. Regulators want to be sure that exchanges employ the best security practices as well as measures — Know Your Customer (KYC), Anti-Money Laundering (AML), and Combating the Financing of Terrorism (CFT), for instance — that discourage illicit transactions and improve account/wallet security.

Some exchanges do take their compliance to those measures seriously. For example, in the aftermath of the Binance hack on May 7, when around 7,074 bitcoins (worth $40 million on the day) were stolen, the company’s founder and CEO, Changpeng Zhao, announced that a significant security update will be conducted that will also include an upgrade to the KYC measures:

“We are making significant changes to the API, 2FA, and withdrawal validation areas, which was an area exploited by hackers during this incident. We are improving our risk management, user behavior analysis, and KYC procedures.”

So, let’s break down if such a stance over compliance with measures like KYC, AML and CFT is common among top cryptocurrency exchanges, and how much of an effect they have on the market and its participants.

What are KYC, AML and CFT

Each country has its laws governing KYC, AML and CFT measures. However, these laws do not come with specific standards, mainly because regulators want financial institutions to do all they can to reduce risks.

“The reasoning seems to be that if banks get clear guidelines on what constitutes adequate KYC they will never look any further than the minimum requirements,” John Callahan, chief technology officer at Veridium, an identity and access management software company, wrote in Forbes.

Know Your Customer

Know Your Customer, refers to a set of procedures and process that a company employs to confirm the identity of its user or customer. The robustness of KYC procedures varies across companies and jurisdictions. However, KYC fundamentally involves the collection and verification of a customer’s means of identification — including government-issued identity cards, phone numbers, a physical address, an email address and a utility bill, to name a few.

Anti-Money Laundering

Anti-Money Laundering measures are a set of procedures, laws and regulations created to end income generation practices through illegal activities. Some of them include tax evasion, market manipulation, public fund misappropriation, trade of illicit goods and other activities of this kind.

AML regulations require financial institutions to continuously conduct due-diligence procedures to detect and prevent malicious activities.

Anti-Money Laundering

The crypto industry has already been cited as facilitating a “rise of a new, high-tech era of virtual money laundering,” with cryptocurrency gambling sites reported by blockchain research house CipherTrace as being a common money laundering tool. In addition, Jamal El-Hindi, the former acting director of the Financial Crimes Enforcement Commission (FinCEN), a part of the United States Department of Treasury, hinted that AML compliance will be fundamental to the stability of crypto exchanges in the coming years:

“We will hold accountable foreign-located money transmitters, including virtual currency exchangers, that do business in the United States when they willfully violate US AML laws.”

Combating the Financing of Terrorism (CFT)

Combating the Financing of Terrorism refers to the set of procedures aimed at investigating, dissecting, discouraging and blocking sources of funding intended for activities that realize religious, ideological or political goals through violence, or its threat thereof, against civilians. These procedures provide law enforcement agencies with an alternative, and potentially effective way to track and block terrorist activities.

Yaya Fanusie, the director of analysis for the U.S. Foundation for Defense of Democracies Center (FDD), earlier in September 2018, told the U.S. Congress that terrorist organizations aren’t using cryptocurrency as a funding vehicle. However, the U.S. House of Representatives, on Sept. 26, passed a bill that would establish a task force to fight the use of cryptocurrencies by terrorist groups.

How crypto exchanges approach KYC, AML and CFT compliance

As stated earlier, the process of regulatory compliance for AML and CFT involves KYC throughout transaction lifecycles. The KYC process is generally divided into four levels, namely:

  • Customer acceptance policy (CAP), which is the stage where a company determines and documents the demographics of its desired customers.
  • Customer identification program (CIP), which is the stage where the company confirms that the identity of a (potential) customer matches its CAP.
  • Continuous monitoring of transactions to ensure regulatory compliance, identification of suspicious activities and risk management.
  • Risk management

Based on the information available, it can be examined how exchanges handle these stages. Crypto exchanges will be divided into two groups namely the “fiat-to-crypto” exchanges and “crypto-to-crypto” exchanges. Fiat-to-crypto exchanges are the gates for new fiat money to enter the cryptocurrency market. These exchanges allow users to exchange fiat currencies like dollars for bitcoin, ether or any other supported cryptocurrency. Crypto-to-crypto exchanges, on the other hand, primarily allow users to exchange one cryptocurrency for another.

Fiat-to-crypto exchanges

A few top fiat-to-crypto exchanges include Coinbase, Coinbase Pro, Gemini, Bittrex, Kraken, Bitfinex and Bitstamp.

Fiat-to-crypto exchanges

Fiat-to-crypto exchanges typically perform at least some level of KYC because they deal with fiat money. This forces them to conduct business with banks and other traditional financial institutions, most of whom conduct KYC procedures before doing business with any entities.

Coinbase

Coinbase is a licenced crypto exchange based in the U.S. A full list of the licenses it holds is here. All that the exchange requires to open an account is a full name, an email address and a password. While this means that anyone from anywhere in the world can store, send and receive cryptocurrencies using a basic Coinbase account, ID verification is required to buy and sell cryptocurrency in the 33 countries it supports.

For its KYC, Coinbase chose Jumio’s digital identity solution Netverify in an attempt to be regulatory compliant while still delivering a smooth customer experience. In a bid to further mollify regulators, the company hired former New York Stock Exchange executive Peter Elkins to build the Coinbase Trade Surveillance Program, an initiative to monitor the markets with the aim to weed out bad actors.

Gemini

Also licensed by the U.S. government, Gemini, unlike Coinbase, conducts KYC before allowing anyone to use its platform. On its user agreement page, Gemini states at least 13 regulations — including FinCEN, AML and CTF regulations — to which the users of its platform must be compliant. The exchange was launched in 2014 by brothers Cameron and Tyler Winklevoss.
At the start of the second quarter of 2018, a few months before Coinbase’s trade surveillance reports surfaced, Gemini partnered with U.S.-based stock exchange Nasdaq, which is one of the two largest exchanges in the world, for the deployment of Nasdaq’s SMARTS Market Surveillance technology to track market manipulations and fraudulent trades. The surveillance moves from both Gemini and Coinbase put them in the third stage of the KYC process.

Bitstamp

Bitstamp requires ID and address verification before users can start trading on the platform. In the wake of surged interest in bitcoin, the exchange partnered with Onfido in February 2018, a digital identity verification provider, to handle its KYC to the end in order to make the customer onboarding process frictionless. Bitstamp was originally founded in Slovenia in 2011, but moved to the United Kingdom in 2013, and then to Luxembourg in 2016.

On Nov. 5, Bitstamp chose Cinnober’s crypto trading system for its exchange. Cinnober claims that its trading solution is built for regulatory compliance. The solution also employs Irisium’s market surveillance technology for risk management. Cinnober boasts a list of customers, including the NYSE, the London Stock Exchange, Euronext, and the Johannesburg Stock Exchange, to name a few.

Bitfinex

Developed by fintech company iFinex, Bitfinex allows crypto users to open an account and immediately deposit, trade and withdraw crypto without identity verification. However, verification of a phone number, a residential address, two forms of government-issued ID and a bank statement is required to deposit and trade fiat currencies.

Earlier in the year, Bitfinex employed Irisium’s market surveillance technology to detect fraudulent behavior on its exchange. Bitfinex is based in Hong Kong.

Bittrex

Bittrex requires ID verification before allowing users to deposit, trade or withdraw cryptocurrencies. However, other than having a user agreement page that says its operations comply with KYC, AML and CTF policies — as does every other exchange — it is unknown if the exchange employs a market surveillance technology or plans to do so.

Kraken

Kraken launched following two years of product development and beta testing, making it one of the oldest crypto exchanges. It has five tiers of verification (tier 0 to 4) requirements, depending on users’ intent to use their account. Kraken founder Jesse Powell decided to build the exchange after seeing the struggles of the then-largest — but now defunct — crypto exchange Mt. Gox.

Kraken

Unlike Gemini and Coinbase, Kraken doesn’t appear to have any publicized surveillance program. All that is known comes from a Kraken blog post that was issued in response to the New York attorney general’s questionnaire. The company said:

“We currently employ nearly 200 people (more than 25% of the company) in compliance-related functions. As of Q1 2018, we are processing more than 1 law enforcement request per day, seven days a week.”

At the end of the second quarter of this year, a Bloomberg report called out irregularities involving certain tether trades on the Kraken exchange. John Griffin, a professor of finance at the University of Texas, told Bloomberg that the irregularities noticed are “suggestive of wash trading.” This technique is sometimes employed by traders, who act as both seller and buyer in a given transaction, to give a false impression of supply and demand. This act in itself is illegal. Kraken discredited the content of the report in a blog post. “It’s not clear what harm could come from wash trading of a pegged asset against its peg,” Kraken wrote.

Crypto-to-crypto exchanges

Based on data from CoinMarketCap, top crypto-to-crypto exchanges include OKEx, Binance, Huobi, HitBTC, Bibox, ZB.com, Coinbene and LBank.

Crypto-to-crypto exchanges

Binance

Binance, being a pure cryptocurrency exchange, isn’t as exposed to regulations. Therefore, it allows withdrawals of up to 2 BTC per day without any form of ID verification. For withdrawals up to 100 BTC per day, it requires photo ID verification.

OKEx

OKEx, which partially allows fiat trades, has three levels of verification. Level 1 users have a transaction limit of $10,000 per order or $2,000 for fiat trades, and are required to provide a government-issued ID during verification. Its level 2 allows for trades over $10,000, and requires document verification. Level 3 is for trades above $200,000 and involves video verification.

HitBTC

HitBTC doesn’t perform any form of ID verification at account opening. Users can deposit and trade crypto without going through any KYC procedures. However, the exchange advises users to verify their identity by sending in the usual KYC documents, including bank documents, to its compliance department via email to “avoid eventual verification procedure in the future.” Users have taken to a number of social media channels to complain that HitBTC allegedly limited their accounts, with the exchange operator asking them to verify their identities.

Huobi

Huobi doesn’t appear to require any KYC documents before allowing users to trade, but it does have an ID verification section in the settings area of a user’s account. It appears to only enforce KYC when users reach a certain account usage limit. In addition, Huobi has different withdrawal limits for verified and unverified users.

Bibox

Bibox allows users to trade up to 2 BTC per day without any form of KYC verification. For trades up to 20 BTC per day, it requires a passport verification. On its website, Bibox advises users who want a higher limit to reach out to its support team via email. All that is required to deposit funds and start trading with Bibox are account security measures, including SMS and Google authentication.

Should crypto exchanges take KYC seriously?

Put simply, similar to fiat-to-crypto exchanges, the top crypto-to-crypto exchanges, as determined by their 30-day volume on CoinMarketCap, have some sort of KYC policy that they enforce at different stages. However, many of them haven’t been proactive about compliance.

“To gain respect and empathy from regulators, crypto exchanges need to be proactive about compliance,”  Tony Mackay, who recently launched the Kryptos-X exchange, said. He went on:

“At the minimum, you want to get the on-boarding stage right, even if the crypto market is currently under-regulated. You also want to ensure that your user registration system can detect and deter criminal activities, using the expertise of best-in-class KYC/AML providers.”

Also, unlike their fiat-to-crypto counterparts, crypto-to-crypto exchanges — except for Binance — haven’t been reported as monitoring or tracking transactions to detect market manipulation or fraudulent behaviors.

Should crypto exchanges take KYC seriously?

In October, Binance partnered with Chainalysis, a compliance and investigation company catering to the cryptocurrency space. As part of the partnership, Chainalysis did a global roll-out of its compliance solution, which has a Know Your Transaction (KYT) feature. KYT is a real-time transaction monitoring solution for cryptocurrencies. U.S. agencies — including the IRS and FBI — are using Chainalysis’ solution to track cryptocurrency transactions.

Is it worth playing by the rules?

A recent report from P.A.ID Strategies, a payments and identity security consulting firm, found that the majority of crypto exchanges “lack sufficient background checks.”

It also claims that exchanges, at best, take a reactive approach to being compliant. Only a few have set up a system for monitoring behaviors and appear prepared to deal with regulators despite the under-regulation of the industry.

A recent emerging trend in the crypto space has been that of exchanges closing their offices in highly regulated jurisdictions and setting up shop in jurisdictions — such as Malta — where the local laws are “crypto friendly.” Binance and OKEx are the most notable examples.

For some crypto firms compliance is a double-edged sword in that on one side, firms ensure that no illicit activity is conducted on their platforms, while potentially compromising on the notion of decentralization on the other side.

In June 2019, new Financial Action Task Force (FATF) guidelines will be imposed that govern AML and CFT activities. The announcement from February states:

“Countries should ensure that VASPs [virtual asset service providers] are subject to adequate regulation and supervision or monitoring for AML/CFT and are effectively implementing the relevant FATF Recommendations, to mitigate money laundering and terrorist financing risks emerging from virtual assets. VASPs should be subject to effective systems for monitoring and ensuring compliance with national AML/CFT requirements.”

There are many who disagree with the tightening of controls, saying that, first of all, it would be difficult to set up domestic regulatory bodies, and in the meantime, companies may suffer as they will become overburden by reporting.

It is also not always possible to know the identity of the beneficiary, whom the destination wallet belongs to and what type of a wallet it is, according to Chainalysis. The company states that it would be more beneficial to collect wallet addresses of bad actors instead of user’s personal information.

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Bitstamp to Expand US Operations by Hiring Former Coinbase Exec Hunter Merghart

European crypto exchange Bitstamp hired a former Coinbase and Barclays executive as head of United States operations.

European crypto exchange Bitstamp has appointed a former Coinbase executive as head of United States operations, Finance Magnates reports on May 8.

Bitstamp, an entrant of the top 50 crypto trading platforms by daily trading volume, has hired Hunter Merghart in a move to expand its operations in the U.S., following the recent acquisition of a virtual currency license from New York state’s financial regulator.

Merghart will be based in New York and will focus on working with Bitstamps’ new and existing clients — particularly targeting institutional clients — the report notes.

Bitstamp’s new head of U.S. operations has most recently served as head of trading at major U.S. crypto exchange and wallet service Coinbase. Merghart also has years of experience at traditional financial institutions such as global financial services firm Barclays and institutional-grade financial company RBC Capital Markets.

Bitstamp was granted a virtual currency license, known as the BitLicense, by the New York Department of Financial Services in mid-April. The acquisition of the license enabled Bitstamp to allowing NYC-based investors to purchase and sell bitcoin (BTC) and other virtual currencies for U.S. dollars and vice versa.

Yesterday, Bitstamp announced a redesign of its website, claiming to provide a more user friendly platform.

In late April, a report found that the U.S. has the highest share of visits of cryptocurrency exchange platforms globally, with about 22 million visits coming from U.S.-based users.

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Nasdaq Adds Brave New Coin’s XRP Index to Global Data Service

The world’s largest stock exchange announced that it has introduced a new XRP index to its global data service.

The world’s largest stock exchange, Nasdaq, announced that it has introduced XRP Liquid Index (XRRLX), a new XRP index, to its global data service. The news was announced in a post on its website published on April 29.

Per the announcement, the development is part of Nasdaq’s data dissemination partnership with cryptocurrency analytics company Brave New Coin. The company will reportedly send its real-time XRP index level information on the Nasdaq Global Index Data Service SM (GIDS). In a separate announcement, Brave New Coin noted:

“The XRPLX sources data from only the most liquid exchanges by volume and order-book depth […] Current constituent exchanges for the XRPLX include Bitfinex, Bitstamp, Poloniex and Kraken with Coinbase to be added in the next review. ”

According to the dedicated website, GIDS is a service aiming to provide real-time values for its indexes and listed ETPs, while Nasdaq also compiles and delivers weightings and components information, corporate actions and breadth of additional data.

In February, Nasdaq had already began listing Brave New Coin’s Bitcoin Liquid Index (BLX) and Ethereum Liquid Index (ELX).

As Cointelegraph reported in March, CoinMarketCap announced that it will launch two cryptocurrency benchmark indices on Nasdaq Global Index Data Service, Bloomberg Terminal, Thomson Reuters Eikon and Börse Stuttgart.

More recently, Cointelegraph wrote that Nasdaq is allegedly testing trading of a bitcoin (BTC)-based product, according to a tweet by an analyst at quantitative trading analytics service StrongMarket.

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Unconfirmed: Disney Considers $13.2 Billion Equity Deal With Stake in Korbit, Bitstamp

Plans are afoot to give Disney a major say in the fate of Bitstamp and Korbit platforms in future.

Two major cryptocurrency exchanges could soon have Walt Disney Corp. as their owner if a $13 billion equity deal goes through, South Korean English-language daily news outlet The Korea Herald reported on April 17.

Citing a banking industry source speaking to another publication, JoongAng Ilbo, The Korea  Herald revealed the chairman of online gaming giant NXC Corporation, Jung-ju Kim, plans to sell his 98.6% stake in the company.

NXC owns 47% of Nexon, South Korea’s largest game developer, which in turn has stakes in South Korean exchange Korbit and European platform Bitstamp through a Belgian subsidiary.

According to the source, Disney, with whom Kim has a close relationship, is already the preferred buyer, other competitors including Chinese internet giant Tencent and South Korea’s Kakao Corp.

The equity buyout would be worth 15 trillion won ($13.2 billion), and would give Disney a significant if coincidental foothold in the cryptocurrency exchange industry.

Bitstamp is the oldest major exchange still in operation, originally hailing from Slovenia, while Korbit began operations in 2013.

Neither Nexon nor the exchanges involved have yet produced public comment on the press rumors.

To date, Disney has had little to do with cryptocurrency, its Dragonchain blockchain remaining a fringe project despite a 2017 initial coin offering (ICO) raising around $13 million.

As Cointelegraph reported, last week saw another major investment in the South Korean exchange space, with the owner of fellow platform Bithumb gaining $200 million funding from a Japanese blockchain fund.