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Hodler’s Digest, Dec 10-16: Top Stories, Price Movements, Quotes and FUD of the week

The CEO of Mt. Gox is facing ten-years in Japan for embezzlement charges, and ASIC mining rigs are struggling to make a profit.

Top Stories This Week

CEO of Defunct Mt. Gox Exchanges Faces Ten Year Jail Sentence Over Embezzlement

Mark Karpeles, the former CEO of now-defunct Japanese Bitcoin exchange Mt. Gox, could be facing a ten-year jail sentence over charges of embezzlement. Karpeles, who headed the exchange during the major hack in 2014 that resulted in the loss of 850,000 BTC ($2.87 billion at press time), has denied any wrongdoing. Prosecutors in a Tokyo court this week have claimed that Karpeles had stolen around $3 million worth of funds from the exchange, in a case not connected to the hack.

Only Two ASIC Mining Rigs Remain Profitable in Current Crypto Markets

During this week’s cryptocurrency market crash, crypto mining machines are having trouble making a profit for their operators, according to data from a mining profitability site. At one point this week, ASICMinerValue.com  — which calculates real-time profitability for ASIC miners — found that only two were currently making any profit. Both of the profit-reaping miners were released in October 2018 and were making $0.58 and $0.21 in profits at the time. At press time, however, more than two miners are now in the green.

Canadian City of Calgary Launches Digital ‘Calgary Dollar’ for Intracity Transactions

The Canadian city of Calgary, located in the province of Alberta, has launched its own digital currency: the Calgary Dollar. The digital currency will allow citizens, using an app on their devices, to support small businesses and nonprofits by keeping funds within the city. The Calgary Dollar can be used at shops and restaurants that participate in the program and can be earned in various ways, such as by inviting friends to the app or posting an ad for goods and services priced in the digital currency.

US SEC Chairman Speaks Positively of Initial Coin Offerings as Capital Raising Tool

The chairman of the United States Securities and Exchange Commission (SEC), Jay Clayton, said this week that Initial Coin Offerings (ICOs) “can be effective” instruments for raising capital. During a speech given this week, Clayton noted that there are a “number of concerns” related to ICOs, but that they can be “effective” ways to raise capital providing that securities laws are followed. Clayton also mentioned the SEC’s Strategic Hub for Innovation and Financial Technology (FinHub), which will facilitate the agency’s involvement in fintech.

Samsung Refutes Rumors of Plans to Add Crypto Cold Wallet on Galaxy S10 Smartphone

Korean-headquartered transnational tech conglomerate Samsung has refuted rumors this week that it plans to launch a crypto cold wallet on its Galaxy S10 smartphone. The rumors began after the company filed three E.U. trademarks for blockchain- and cryptocurrency-software. SamMobile confirmed to Cointelegraph that the trademarks are part of the development of a Samsung proprietary cold wallet, which “may be launched” with the Galaxy 10 smartphone.

Winners and Losers

The cryptocurrency markets are holding steady, with Bitcoin (BTC) trading at around $3,275, Ripple (XRP) at around $02.38, and Ethereum (ETH) at around $86,29. Total market cap is about $104 billion.

The top three altcoin gainers of the week are Bolenum (BLN), Vestoria (VSTR) and SURETY (SURE). The top three altcoin losers of the week are BitF (BITF), KWH Coin (KWH) and DACH Coin (DACH).

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

Most Memorable Quotations

“I believe that ICOs can be effective ways for entrepreneurs and others to raise capital. However, the novel technological nature of an ICO does not change the fundamental point that, when a security is being offered, our securities laws must be followed,” — Jay Clayton, United States Securities and Exchange Commission (SEC) chairman

“We’re totally at home in winter,” — Tyler Winklevoss, speaking about the crypto bear market

“The audience is more sober now—the drug is gone. […] But it’s not going to zero. We’re at the methadone clinic,”  — Mike Novogratz, founder of Galaxy Digital

Prediction of the Week

Tom Lee: Bitcoin’s Fair Value Price Could Reach as High as $150,000

Crypto bull and co-founder of Fundstrat Global Advisors Tom Lee said this week that Bitcoin’s (BTC) “fair value” is much higher than its current price. In a note from this week, Lee also said that the coin’s fair value is between $13,800 and $14,800, also adding that the value could reach as high as $150,000. Lee added: “In fact, working backwards, to solve for the current price of Bitcoin, this implies crypto wallets should fall to 17 million from 50 million currently.”

FUD of the Week

China: Central Bank Governor Defines STOs as ‘Illegal Financial Activity’ in the Country

The People’s Bank of China (PBoC), the country’s central bank, highlighted the illegality of Security Token Offerings (STOs) in the country in a statement this week. Pan Gongsheng reportedly told a summit in Beijing this week that both STOs and ICOs were “rampant” in the mainland, despite the “nationwide clean-up” of the crypto markets in China last year. In regards to the “STO business” in China, Gongsheng added that cryptocurrencies are still associated with crime.

Major Stablecoin Profit Basis to Shut Down and Return Funds to Investors

Major United States-based stablecoin project Basis will shut down operations and return most of its funds to investors. The algorithmic stablecoin project will return the majority of its $133 million in funding that it raised during a private placement in April, according to a report.

Bloomberg later reported that Basis’ CEO Nader Al-Naji confirmed that the impetus to close the project came from regulatory concerns over a type of token in Basis’ — as well as other algorithmic stablecoins’ — a system known as a “secondary token,” which helps keep the coin’s price stable. Al-Naji noted that there was no way to “escape” classification as a security.

Head of Largest Romanian Crypto Exchange Arrested for Fraud on US Warrant

Vlad Nistor, the CEO of Romania’s largest crypto exchange Coinflux, was reportedly arrested on a warrant from the U.S. for fraud, organized crime and money laundering. Coinflux is an online digital currency trading platform, with reportedly more than 200 million euro worth of Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Ripple (XRP) in transactions. Nistor was allegedly arrested in Romania at the behest of the U.S.

After this arrest, CoinFlux posted an announcement about a temporary suspension of all digital currency exchanges, noting that the investigation has also restricted its access to some parts of the platform.

Best Cointelegraph Features

Europe Takes Serious Steps Toward Blockchain Adoption

Cointelegraph explores how Europe is orienting itself towards blockchain and digital ledger technology as a whole. Looking at several initiatives, including the European Blockchain Partnership and the blockchain-based healthcare project, the analysis examines how Europe is working to become a “global leader” in DLT.

From South Korea to IBM Food Trust – How Blockchain Is Used in the Food Industry

In this analysis, Cointelegraph looks at how different companies and areas in the food industry use blockchain technology to bring transparency to their food chains, and why that the traditional use of blockchain doesn’t always work here.

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China: Shenzhen Special Economic Zone to Use Blockchain for Electronic Tax Invoices

Tencent and the Shenzhen Municipal Taxation Bureau will launch a mobile payment platform for a taxation invoice system based on blockchain.

Shenzhen, a major city in the Guangdong Province and the first economic special zone in  China, will use blockchain technology for electronic tax invoices. This development was reported by the China Economic Net, а domestic news website focusing on economics, on Dec. 12.

The Shenzhen Municipal Taxation Bureau and Chinese tech giant Tencent have “successfully connected the blockchain invoice system with the WeChat payment platform.” The article reports that WeChat, the 1 billion user social media platform operated by Tencent, has opened its payment platform for the blockchain invoice function.

According to the director of the Information Center of Shenzhen Taxation Bureau, a blockchain electronic invoice is different from a traditional electronic invoice, as it has “the advantages of ‘distributed’ storage, traceability and non-tamperability.”

The article highlights that WeChat payment blockchain invoices are the first stop for the blockchain electronic invoice implemented within the mobile payment platform, adding:

“The application of the blockchain electronic invoice to the WeChat payment platform is a substantial exploration made by the Shenzhen Tax Department based on the actual needs of the taxpayers to further optimize the business environment.”

Previously this fall, the Shenzhen central sub-branch of the People’s Bank of China (PBoC) — the country’s central bank — launched the trial phase of the “Bay Area Trade Finance Blockchain Platform,” aimed at providing real-time monitoring of various financial activities, as Cointelegraph reported Sep. 4.

Last week, the BeiShangGuang — an abbreviation that stands for the three major Chinese cities of Beijing, Shanghai and Guangzhou — has reportedly become China’s most concentrated area of legislation and policy related to the blockchain industry.

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Bitmain Closes Israeli Blockchain Development Center Citing Crypto Market Conditions

Chinese mining giant Bitmain will close its Israeli blockchain and AI development center, letting its 23 local employees go.

Chinese crypto mining giant Bitmain is closing its development center in Israel and firing local employees, Israeli business news outlet Globes has learned Monday, Dec. 10.

Bitmaintech Israel — founded in 2016 to explore the use of blockchain technology, work on the Connect BTC mining pool and develop the infrastructure behind Bitmain’s artificial intelligence (AI) project Sophon — will close this week. All 23 employees will be fired, the Globes reports.

Gadi Glikberg, head of the Israeli branch as well as Bitmain vice president of international sales and marketing, is also leaving. The Globes reports that Glikberg linked the closure to the recent crypto market collapse:

“The crypto market has undergone a shake-up in the past few months, which has forced Bitmain to examine its various activities around the globe and to refocus its business in accordance with the current situation.”

Bitmain is also currently facing two lawsuits. The first one, a class action lawsuit of $5 million focused on unauthorized mining, was filed in the North District Court of California against Bitmain’s United States– and China-based entities.

The second suit was purportedly filed against Bitmain, Bitcoin.com, Roger Ver and the Kraken Bitcoin Exchange. The case alleges that the defendants jointly used unfair methods and practices to manipulate the BCH network for their benefit.

In early December, Israel has seen a crackdown on unreported crypto earnings. According to local business newspaper Calcalist, Israeli tax authorities opened tax accounts for hundreds of Israelis who allegedly concealed cryptocurrency related revenues. As cryptocurrencies are treated as a financial asset in Israel, they are subject to a 25 percent tax for private investors.

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Chinese Central Bank Governor Defines STOs as ‘Illegal Financial Activity in China’

The governor of the Chinese central bank has stated during a summit that STOs are an “illegal financial activity in China.”

The People’s Bank of China (PBoC), the country’s central bank, highlighted the illegality of Security Token Offerings (STOs) in the country, English-language local news outlet South China Morning Post (SCMP) reports Dec. 9.

A deputy governor of China’s central bank, Pan Gongsheng, reportedly told a summit in Beijing “that ‘illegal’ financing activities through STOs and ICOs [Initial Coin Offerings]  were still rampant in the mainland despite a nationwide clean-up of the cryptocurrency market last year.”

Gongsheng also said that if the government had not stepped in, the chaotic crypto market could have hurt the overall financial stability in China.

The central bank official pointed out that “the STO business that has surfaced recently is still essentially an illegal financial activity in China.” Gongsheng also reiterated the stance that cryptocurrencies are associated with crime:

“Virtual money has become an accomplice to all kinds of illegal and criminal activities.”

According to the article, Gongsheng noted that “most of the financing operations conducted through ICOs in China were suspected of being illegal fundraising, pyramid sales schemes and other financial fraud.”

The article also mentions that the chief of the Bureau of Financial Work, Huo Xuewen, warned against STOs about a week ago. He said:

“I want to warn those who are promoting STO fundraising in Beijing. Don’t do it in Beijing. You will be kicked out if you do it.”

On the other hand, blockchain adoption — the tech behind most cryptocurrencies — has been relatively embraced in China. As Cointelegraph recently reported, a Chinese Internet Court has started using blockchain to protect the intellectual property of online writers.

The legal basis of this development can be assumed to be the Chinese Supreme Court’s ruling from September, which established that blockchain can legally authenticate evidence.

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Chinese Internet Court Uses Blockchain to Protect Online Writer’s Intellectual Property

A Chinese Internet Court has started using blockchain to protect the intellectual property of online writers.

An Internet Court in Hangzhou, Eastern China, has turned to blockchain to fight piracy at the expense of online writers, English-language media outlet China.org.cn reports Dec. 8.

China has reportedly “set up three Internet courts in Hangzhou, Beijing and Guangzhou.” Internet Courts are courts expressly intended to manage internet-related cases and allow plaintiffs to file their complaints online.

The official website of Hangzhou Internet Court reads that it “behave[s] as an ‘incubator’ for Internet space governance, a ‘test field’ for Internet judicial rules, a ‘leader’ for diversified Internet disputes, and a ‘first mover’ for the transformation of Internet trials.”

Hangzhou, whose Internet Court plans to use a blockchain copyright system, is “home to many, if not most, online writers in China,” according to China.org.cn. The news outlet notes that 107 “famous” online writers work in a “writers’ village” in the Binjiang District of the city.

The aforementioned article explains that online writers are frequently damaged by piracy, and it’s often hard for them to prove that they are the original authors of any text. Writers used “to resort to screenshots and downloaded content as evidence,” but this is weak evidence since it can be easily forged, China.org.cn notes.

Wang Jiangqiao, a judge at Internet Court, said that since “blockchain guarantees that data can not be tampered [with] […] all digital footprints stored in the judicial blockchain system […] have legal effect,” specifically noting the ability to track “authorship, time of creation, content and evidence of infringement.”

Wang Jiangqiao’s statement is in line with China’s Supreme Court ruling in early September that blockchain can legally authenticate evidence.

As Cointelegraph previously reported in an analysis, blockchain use to contrast piracy in online media is nothing new.

A Russian startup is also reportedly working on a blockchain-based copyright network in Uzbekistan. The project will start by digitizing patents and storing them on-chain before moving onto securing intellectual property as well.

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Blockchain Policy Development in China Concentrated in Three Cities

One third of national blockchain-related policies in China have been made in three areas: Beijing, Shanghai and Guangzhou.

Beijing, Shanghai and Guangzhou — or BeiShangGuang — has become the most concentrated area of ​​relevant blockchain legislation and policy in China, reports local finance publication Securities Daily Dec. 7.

The Chinese securities newspaper has analyzed blockchain-related policies introduced throughout the country in the recent years, and concluded that there are 32 blockchain-related policies within the country. Meanwhile, 11 projects are concentrated in three areas: Beijing , Shanghai  and Guangzhou. The publications states:

“Blockchain technology [is aimed] to serve the real economy, focusing on the balance between innovation, regulation and security, and clarifying the bottom line of financial stability and information security.”

China has adopted a split policy toward blockchain and cryptocurrencies, praising and adopting blockchain technology — China’s President Xi Jinping has publicly called blockchain a technological priority of the 21 century — while banning cryptocurrencies.

Last month, China’s Ministry of Industry and Information Technology (MIIT) published a document, calling  to “accelerate” the development of standards for blockchain system applications across various domestic industries.

Also last month, a new blockchain alliance, involving 54 different companies, was established in Guangzhou city, aimed to promote and develop blockchain technology in the country.

Meanwhile, the Chinese government has purportedly censored certain materials pertaining to cryptocurrencies. When Andreas Antonopoulos’  book “Mastering Bitcoin” appeared on China’s state-run TV channel, the title had been changed to “Blockchain: the Road to the Digitization of Assets,” and contained no references to Bitcoin (BTC).

The People’s Bank of China (PBoC), the Chinese central bank, had made several warnings against cryptocurrencies, calling them “bubbles” in financing and investment. Earlier this week, the Beijing Municipal Bureau of Financial Work reminded the public that Security Token Offering (STOs) were considered illegal in the jurisdiction.

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Report: More Chinese Miners Selling Short Following Crypto Market Slump

Chinese miners are reportedly becoming the biggest short-sellers of BTC in the current bear market.

Chinese miners are reportedly becoming the biggest short sellers both locally and internationally, following an increased number of hedging operations in the current bear market, Chinese crypto outlet 8BTC reported Thursday, Dec. 6.

The severe cryptocurrency market decline in the last month has reportedly caused new generation miners to start hedging their coins to avoid market risks. At the same time, frequent hedging operations make miners the biggest short sellers of Bitcoin (BTC), according to 8BTC.

Jin Xin, a Chinese miner who entered the industry in October 2017, reportedly said that the earnings from mining he made in the first two months are “much more” than the total profits he made in the past three years through other business. Jin said:

“If I mine 30 tokens in the next month, while its price may continue to fall by another 10 percent according to the current trend, I shall place a short order on the exchange to sell them at current price but deliver one month later.”

Jin reportedly developed his own strategy to withstand the bear market. He buys already used graphic processing unit (GPU) miners to boost his machines’ performance. Once the “shutdown price” is reached, Jin power down the equipment, removes GPU chips and sells them to game players.

As Cointelegraph reported in late November, cryptocurrency mining operators in China are reportedly selling mining equipment by weight, as opposed to price per unit, as the market slump had resulted in a large drop in mining profitability. Crypto miners were reportedly especially eager to sell the older models, including Antminer S7, Antminer T9, and Avalon A741, as these have reached their “shutdown price.”

Also in November, U.S. technology giant Intel filed a new patent for “energy-efficient high-performance Bitcoin mining.” The patent is dedicated to a “hardware accelerator implementing SHA-256 hash using optimized data paths” and aims to reduce energy for BTC mining by up to 15 percent. The document states that “clusters of SHA engines may consume a lot of power (e.g., at a rate of greater than 200 W).”

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Chinese Crypto Investor to Develop Stablecoin Within Hong Kong-Based Blockchain Fund

China’s Bitcoin “tycoon” Li Xiaolai will develop a stablecoin within the Hong Kong-based blockchain fund Grandshores Technology.

Chinese crypto investor Li Xiaolai will lead a stablecoin project within Hong Kong-based blockchain fund Grandshores Technology, according to an official document issued on Monday, Dec. 3.

China’s Bitcoin (BTC) “tycoon” Li Xiaolai has been also appointed as an executive director and co-chief executive officer of Grandshores Technology starting from Monday, Dec. 3.

Within the new position at the blockchain fund, Li Xiaolai will lead a number of initiatives including the launch of a stablecoin, establishment of a Directed Acyclic Graph (DAG)-based public database, development of Trusted Execution Environment (TEE) technologies, and other blockchain-related projects.

According to the report, the new stablecoin will represent a “stable digital currency system” that that will be focused on global mainstream currencies.

As previously reported by Cointelegraph, Grandshores Technology blockchain innovation fund revealed its plans in mid-September to raise $12.7 million in order to fund stablecoins.

The fund’s chairman Yao Yongjie had announced that the company plans to launch three fiat-pegged stablecoins, with the first expected to be based on the Japanese yen. Two other stablecoins are expected to be pegged to the Hong Kong and Australian dollar. As previously reported, Grandshores Technology is planning to offer investments through U.S. dollar-pegged stablecoin Tether (USDT), with a yen stablecoin set up for launch in January, 2019.

In early October, Li Xiaolai claimed that he will stop investing in blockchain-related projects, citing increased fraudulent activity in the blockchain industry.

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Major South Korea Tech Holding and ConsenSys Sign MoU to Develop Blockchain Business Hub

SK Group has signed an MoU with ConsenSys to create and develop an “enterprise blockchain ecosystem.”

South Korean technological holding SK Group has signed a Memorandum of Understanding (MoU) with ConsenSys for blockchain business cooperation, according to a SK Group official press release published today, Dec. 4.

SK Holdings C&C is the information technology solutions arm of the SK Group, one of the the largest conglomerates in South Korea. The entity has partnered with ConsenSys, an Ethereum (ETH) software technology company based in U.S., to create and develop an “enterprise blockchain development hub.”

The MoU is aimed at building an enterprise blockchain business model by using smart contracts, the press release notes, adding:

“The two companies will begin to explore business models for expanding their enterprise blockchain business through joint analysis of their respective blockchain platforms, technologies and services.”

The new partnership will also include Ethereum blockchain technology education for Korean developers through ConsenSys Academy and SK Holdings C&C’s Tech Training Center, scheduled to be completed by the end of the year.  

Back in the summer, ConsenSys had already agreed to advise China’s Xiongan New Area government on blockchain and software solutions to bring new technologies to the Chinese “smart city,” as Cointelegraph reported Jul. 24.

SK Group has already made several steps towards the cryptocurrency market. SK Telecom, a subsidiary of the SK Group, has invested in crypto exchange Korbit among the first major investors. In the spring, SK Telecom also announced the release of a new tech platform for linking blockchain startups with investors, as Cointelegraph wrote Apr. 24.