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Hacked Crypto Exchange Bithumb Made $35 Million Profit in First Half 2018

South Korean cryptocurrency exchange Bithumb made net profits of 39.34 billion won (about $35 million) in the first half of this year, despite a rough June for the firm.

Vidente, a video equipment maker that owns 10.55 percent of Bithumb and 10 percent of its holding company, revealed the financial data to a South Korean financial regulator on Thursday, according to local news agency Yonhap.

Before deductions, the filings state, Bithumb collected a total of $270 million in revenue within the first six months of 2018, with $194 million in operating profits.

While the data for the same period last year is not available, Yonhap said Bithumb made $380 million in net profits in 2017 alone, more than 10 times its half-year profits so far.

It’s been a rocky summer for Bithumb so far. The platform suffered a major breach in June that saw around $31 million in cryptocurrencies stolen – though it later claimed to have clawed back $14 million. It’s not clear if that event has affected the disclosed first-half figures significantly or if the costs will be pushed to a later accounting period.

An investigation into possible tax evasion launched in January also saw the company receive a hefty bill of around $28 million as it concluded, also in June – although no wrongdoing was found.

Data from CoinMarketCap indicates the 24-hour trading volume on Bithumb, once the world’s largest cryptocurrency exchange, has taken a significant plunge this year.

For instance, on Jan. 2, Bithumb was the world’s third-largest trading venue with $2.5 billion in 24-hour trading volume. It has now dropped to the 19th, with around $71.7 million changing hands in the past trading day.

CoinDesk also reported early this month that the 24-hour trading volume on Bithumb plunged by 40 percent from $350 million to $250 million within a week after it suspended the opening of new customer accounts due to a banking restriction – an issue also related to the hack.

In similar news, Dunamu, the software developer that owns the Upbit exchange, has also just disclosed its latest financial data. According to the report, Upbit netted $97 million in profit during the first half of 2018.

Bithumb image via Shutterstock

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GMO's Cryptocurrency Business Made $2.3 Million Profit in Q2

Japanese IT giant GMO has just reported making an operating profit of 255 million yen (about $2.3 million) for its cryptocurrency business in the second quarter of this year.

The firm released its financial report following an earnings call on Thursday, which indicated that the company’s crypto segment made a total of 2.6 billion yen, or $23 million, in net revenue.

The amount generated in the crypto segment was almost equally split between the mining and exchange businesses, which accounted for 47 and 53 percent of the net revenue, respectively.

That said, with operating costs mounting to $21 million in just three months, GMO recorded a relatively small margin of $2.3 million, or 10.95 percent. However, the figure looks more respectable when placed in the context of GMO’s net loss of $6.6 million in the first quarter – mainly due to negative revenue suffered by its exchange business in the first two months of this year.

Although GMO didn’t provide a breakdown of the operating costs for the crypto segment in Q2, it did indicate that a notable portion arises from the mining side of its business.

“Although the expansion and mining equipment progressed as planned and recorded sales of 1.2 billion yen, mining profitability declined due to deterioration of the macro environment such as stagnation of bitcoin price as well as the increase of hash rate,” the report said.

Indeed, according to GMO’s latest mining report, dated Aug. 3, the firm appears to have increased its mining capacity in the second quarter. For instance, the company mined 512 bitcoins in the first quarter – less than the 528 bitcoins GMO mined in June 2018 alone.

Notably, those figures come soon after the launch of GMO’s own 7nm bitcoin miners, which were touted as having higher hashing power alongside lower electricity demands.

Before now, the only previous profitable quarter for GMO’s fledgling crypto business was Q4 2017, a time when bitcoin prices soared to a record high of nearly $20,000.

Japanese yen image via Shutterstock

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12 Chinese Banks Say They Deployed Blockchain in 2017

Nearly half of the 26 publicly listed banks in China said they have deployed blockchain applications in 2017, according to a report.

Chinese banking industry news source CEBNet said Friday that, among the 26 Chinese banks, 12 of them disclosed in their annual filings that blockchain applications were adopted for various use cases over last year.

The 12 institutions include major state-owned commercial banks such as the Bank of China, China Construction Bank and the Agriculture Bank of China, as well as other privately held ones, including China Merchants Bank and other city-level entities.

The applications that have been adopted range from using blockchain technology to issue invoices and cross-border loans to ID authentication processes.

For example, according to the annual filing from the Agriculture Bank of China, the state-owned entity has developed a decentralized network to offer unsecured loans for agricultural e-commerce merchants that it said offers an automatic loan issuance process.

Similarly, China Construction Bank also disclosed in its financial statement that it has launched a blockchain-based platform that provides cross-bank and cross-border loan issuance for small businesses. The bank further boasts that the platform has so far processed transactions that worth a total of 1.6 billion yuan, or $251 million.

Taking another approach, Bank of China said that it has completed testing for a distributed IT infrastructure to be deployed across its branches for further development of a blockchain-based digital wallet.

The banks’ en masse move to adopt blockchain comes at a time when the country’s banking regulator has also praised the benefit of applying the technology in the financial sector – especially when it comes to improving the efficiency of loan issuance.

Recent patent applications, as reported by CoinDesk, also indicated that China’s state-owned banks have been exploring ways to use blockchain technology to solve data storage issues and to streamline certificate authentication processes.

China Construction Bank image via Shutterstock

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Square Books Small Profit for First Quarter of Bitcoin Sales

Digital payments startup Square made more than $34 million in revenue in the first quarter from cryptocurrency purchases.

In a 10-Q filing submitted to the U.S. Securities and Exchange Commission, Square declared its financial results for Q1 2018, noting that roughly 5 percent of its revenue came from customers purchasing bitcoin through its Cash app. Due to the costs of purchasing the cryptocurrency, the company’s total profit in the time period is about $223,000.

According to the filing:

“For the three months ended March 31, 2018, the revenue recognized from contracts with customers was $648.8 million, including $34.1 million from bitcoin sales. Revenue from other sources was $19.8 million. Impairment losses arising from contracts with customers were not significant in the current reporting period.”

However, the cryptocurrency-based revenue is offset by the $33.9 million it cost to purchase the bitcoin in the first place, according to the filing. Square defines its bitcoin costs as “the amounts we pay to purchase bitcoin in the public cryptocurrency exchanges or from customers. The amount of bitcoin costs will fluctuate in line with the associated revenue.”

Square first enabled bitcoin buying through the Cash app last November as part of a pilot program open to a limited number of users. At the time users were unable to make bitcoin payments using the app.

The company changed this policy in late January, when it gave users the ability to send payments to friends and family members. Bitcoin payments also expanded to almost all U.S. customers, with the exception of those in New York, Georgia, Hawaii and Wyoming – all being states with tougher regulations around cryptocurrencies.

Bitcoins and dollar image via Shutterstock

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Samsung Sets Q1 Profit Record with Crypto Mining Boost

Samsung Electronics has reported 58 percent year-on-year growth in its operating profits for Q1 2018 – an increase driven in part by strong demand for cryptocurrency mining chips.

During a financial earnings call on Thursday, Robert M. Yi, Samsung’s executive vice president of investor relations, said the profitability increase seen in the firm’s semiconductor business played a significant role in setting a new quarterly operating profit record of 15.6 trillion Korean won ($14 billion).

Yi explained the phenomenal rise, saying:

“In the semiconductor business, the earning increases significantly year over year thanks to favorable market conditions driven by strong demands in server and graphic card memories as well as earning improvement in both the System LSI and Foundry businesses led by an increasing demand of chips used in flagship smartphones and cryptocurrency mining.”

While Samsung did not disclose precise figures for the mining chip side of the business, the positive figures follow a February confirmation from the tech giant that it was now producing 8nm and 11nm processors to meet growing market demand from the cryptocurrency mining industry.

Samsung’s expansion into cryptocurrency mining also adds to the regional competition in the sector, with Taiwanese chip maker TSMC also reporting similar growth in mining chip demand during its own recent earnings call.

Looking ahead, Samsung forecast that the demand for mining processors will continue to expand in Q2, while the earnings of its LSI and Foundry businesses may decrease due to slowing demand for smartphone components.

Samsung chip 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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SEC Chief Accountant to ICOs: Don't Skimp on Financial Reporting

The SEC’s chief accountant is cautioning businesses involved with initial coin offerings (ICOs) to be mindful of their financial reporting obligations.

Wesley Bricker, who has served as the regulator’s top accountant since last year, spoke on September 11 before the AICPA National Conference on Banks & Savings Institutions, held in Washington, DC. His speech, published by the SEC, covers a range of areas but notably concluded with an aside on ICOs.

After touching on some of the elements of the SEC’s statement on the subject in July – during which time the agency said federal securities laws may apply to some ICOs – Bricker raised a series of questions both issuers and holders of ICOs should consider for financial reporting.

For issuers, questions included:

  • Are there liabilities requiring recognition or disclosure?
  • Are there implications for the provision for income taxes?
  • Are there previously recognized assets that require de-recognition?
  • Are there revenues or expenses requiring recognition or deferral?
  • Is there a transaction with owners, resulting in debt or equity classification and possibly compensation expense?
  • What are the necessary financial statement filing requirements?

Likewise, he advised investors and token owners to ask:

  • Does specialized accounting guidance (such as for investment companies) apply to the holder’s financial statement presentation?
  • What are the characteristics of the coin or token in considering whether, how, and at what value, the transaction should affect the holder’s financial statements?
  • What is the nature of the holder’s involvement in considering whether the issuer’s activities should be consolidated or accounted for under the equity method?

Bricker ultimately cautioned that these are only “illustrative questions” and that, in a refrain from the previous SEC statement, the specifics of the ICO itself would determine what reporting requirements must be met.

“An entity involved in initial coin or token offering activities will need to consider the necessary accounting, disclosure and reporting guidance based on the nature of its involvement,” he told attendees.

Wes Bricker image via PwC

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