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Winklevoss Capital Partner Sterling Witzke: Dollar Is Not Designed for the Internet, but Stablecoins Are

Winklevoss Capital partner Sterling Witzke spoke to Cointelegraph about the future of stablecoins, regulatory clarity in U.S. and a fair price for Bitcoin

Sterling Witzke has been working at Winklevoss Capital — a venture capital firm set up by the famous Winklevoss twins — for five years now. As a professional investor, she is very interested in financing early stage crypto and blockchain projects. She believes that stablecoins are perfectly designed for the needs of internet payments and will steadily gain popularity as the industry evolves.

We talked to Sterling Witzke about the future of fiat-pegged cryptocurrencies, the necessity of proper legal frameworks and the future of the maturing crypto industry.

Clarity is always good for an ecosystem

Ana Berman: How do you think, what will 2019 bring in terms of regulation? The question is related to the ads that Gemini recently launched, which said, in particular, “Crypto needs rules.” Don’t you think it undermines the whole idea of decentralization?

Sterling Witzke: The short answer is no. As you know from the slogans, Gemini is very pro-thoughtful regulation and believes that consumers in the crypto space deserve the same protection as consumers in other industries.

It’s all about making fair outcomes for all. It doesn’t undermine the original ethos of crypto to have regulations. The distinction comes with the companies that are built on top of the protocol. So, at the protocol level, it’s absolutely correct that you don’t need any more regulation and rules, because those are already built in.

You’ve got the math and the cryptography that dictates the rules on the protocol. The difference is that the applications and companies built on top of those protocols are run by humans, and we all know they are fallible. That’s where the oversight comes into play.

AB: The United States Securities and Exchange Commision (SEC) has recently claimed that crypto will be its top examination priority in 2019. Do you believe the SEC will take some important steps this year?

SW: I hope so. I think that regulatory clarity, especially on things like security tokens versus utility tokens, is needed to get us towards mass adoption. I know there are several companies that were thinking about raising capital, but are now a bit hesitant because they just aren’t quite sure how to operate in a gray area. Such firms want to ask for permission rather than forgiveness, which is our model also, and thus we appreciate that. But I think that clarity is always good for an ecosystem.

AB: Many entrepreneurs participate in crypto initiatives, like draft bills, round tables, etc. Is Winklevoss Capital interested in proposing some regulation or maybe discussing it with legislators?

SW: Tyler and Cameron are very involved and proactively working with regulators to help form the way that these rules are made, which I think is very important. We don’t want government to come down with a heavy hand, as they might not understand the intricacies of the ecosystem.

I am not involved in the regulatory side, but Tyler and Cameron have been very active in the space for a long time. One of the most recent initiatives is the Virtual Commodities Association [VCA], which is a self-regulatory organization started by Gemini. I believe that its current executive director, Maria Filipakis, is actually from the the New York Department of Financial Services [DFS]. So, there is a lot of ongoing communication and collaboration with regulators to try to move this case forward.

Investors are dipping their toes in crypto, no one is taking the plunge

AB: As far as we know, Winklevoss Capital is mostly focused on the investments and the institutional side of the business. Do you believe there will be more Wall Street involvement in 2019? What do you expect in terms of institutional investments?

SW: I don’t think that 2019 is necessarily the year. The end of 2017 was so crazy. People tend to think of the space as moving at lightning speed, but the underlying development doesn’t move that fast. I think it takes a while for institutions to get comfortable. There needs to be a better custody, and any kind of healthy debt and credit markets to get those institutions really excited.

So, I don’t think that I would make a prediction that 2019 is necessarily the year. I think that a lot of investors are thoughtfully dipping their toes in, but I don’t really see anyone completely taking the plunge.

Crypto markets face healthy corrections, as any emerging industry

AB: CNBC’s Brian Kelly once compared crypto regulations to a ski track. Someone has to put a warning sign on a dangerous one, and the skier then decides whether to take risk or not. Do you think it is a relevant description of what’s going on?

SW: I think that is a nice sentiment. The majority of me believes in free markets and free will. Everyone should be able to invest in what they want to invest in. But the fact is that we have some responsibilities to protect people.

I grew up in South Dakota, for example, and crypto has not really made a splash in the Midwest, yet. In the end of 2017, I had lots of friends who bought Bitcoin at $18,000 or $19,000 and kind of lost their shirts. For such a new market, we need the same protections as we do with public equities. The precedent is already here, and there is really no difference.

AB: You just mentioned the bubble of December 2017. Do you think it was a necessary process — let’s say, a sign of development?

SW: One hundred percent. I think that lots of new industries need irrational exuberance to garner excitement and really get the word out there. Thousands more people now know of Bitcoin. That said, there’s no reason why Bitcoin should have been $19,000.

That was all irrational exuberance, bubble — whatever you want to call it. You could maybe argue that this is an overly healthy correction, but I think that a healthy correction was 100 percent necessary. It’s part of the traditional cycle of a new industry emerging.

It was necessary to move this base forward, because it got rid of a lot of bad actors. From the end of 2017 to the beginning of 2018, we saw every Joe Blow creating an ICO [initial coin offering] just to raise, in some instances, hundreds of millions of dollars, and then take off and drink a Mai Tai on the beach. But their investors lost everything. The people that are left and active in the space are really in it for the long term. They see the fundamental effect that blockchain will have globally for the next 100 years. These people are in the industry for the long term.

Bitcoin is a store of value, not a speculative asset

AB: What, in your opinion, is a fair price for Bitcoin?

SW: I won’t make any price predictions, but I am happy where we are, because we’re in a build phase in the ecosystem. I think that the speculators that drove the price up are now sitting on the sidelines. And again, the people that are left truly believe in an ecosystem and think of Bitcoin as a store of value rather than a speculative asset.

AB: So, the ongoing price correction, let’s say, when Bitcoin hovers around $3,500, is more or less a fair process, right?

SW: I think it’s a fair process. And we’ll probably be at these price levels for a while. There is a lot of underlying infrastructure work to be done with things like scalability, user experience, etc. Maybe not on the underlying infrastructure part, but on the top layer. People aren’t going to use these applications if we can’t make it foolproof and extremely easy to use.

Stablecoins are designed for internet payments

AB: As per recent studies, the era of ICO craziness is now over. Many believe the future is in tokenized assets and stablecoins. Do you share this stance?

SW: The short answer is yes. The dollar has been a great form of payment for a long time, but it was not designed for the internet age we are currently in. We need a stable currency that works with the blockchain and the internet. Fiat-pegged stablecoins bring us ability to purchase assets or to be paid dividends in assets that are not volatile.

The craziest example of using something like Bitcoin as a form of payment is the pizza that was bought for 10,000 BTC back in the day. At that time, it was $20, and now it is about $3 million. So, we need something like a fiat-backed stablecoin to be able to facilitate transactions on the blockchain. It’s a currency designed for crypto.

That said, I’ll give my plug for the Gemini dollar [GUSD]. The Gemini dollar is 100 percent backed by the U.S. dollar, and it’s the only stablecoin that has actually released their banking partner, State Street, and are very upfront about that. State Street can say, “Yes, with 100 percent certainty we have 100 percent of the dollars that back GUSD.”

AB: Can you please tell us something about Winklevoss Capital’s blockchain plans for 2019?

SW: Winklevoss Capital invests in both blockchain and nonblockchain-related startups. So on the traditional venture capital side, we invest in early stage companies, both seed and Series A across industries. We’ve done a little bit of everything from e-commerce to IT hardware, and international logistics, and everything else.

On the blockchain side of things, we think about investing very similarly. We’re not trying to be a hedge fund, we’re not flipping public tokens. We sat out of the ICO craze, we’ve already discussed. We’re looking for a really long-term companies and founders that are trying to build a company for the next decades. We’re investing very patient capital with a seven to 10 years’ time horizon. We’re focused very much on infrastructure. As I mentioned, we think that scalability solutions for things like smart contracts are really interesting.

There’s so many interesting applications, like the ability to prove identity and bank the unbanked, which involves 2 billion people that don’t have an official form of ID or can’t get a bank account. If you think about 2 billion people coming online, not a single existing protocol can handle that.

You can also think of Bitcoin doing seven to 10 transactions a second, Ethereum doing 10 to 15, as a maximum — that’s just not feasible. So, we’re looking at solutions that can solve that problem.

Blockchain will be in focus next years

AB: Could you please name any particular companies you’ve already worked with or would like to invest into?

SW: Not yet, unfortunately. It’s something that I’m actively looking for but have not found, yet. We have not made any investments in this space. I think it’s an area of focus over the next year. I’m hopeful that more and more entrepreneurs will be focusing on that problem because it’s massive.

There are so many applications for a blockchain in the U.S. and in developed countries — to make markets more efficient, to fix what I would call First World problems, etc. But, at the end of the day, when we’re talking about addressing the bottom of the pyramid and applications for that, there is a huge quality of life difference that can be more impactful. I’m looking forward to more entrepreneurs focusing on those applications.

AB: Apart from the social application of blockchain, could you mention some areas that are interesting? What are the most promising industries for blockchain?

SW: I think that remittances are also interesting, but this is a social application as well. Gaming is an industry that is really promising. If you think about developers, they’ve been operating digital economies for a decade. Nobody understands the digital supply and demand economics better than gaming developers, and so that feels like a natural adaptation of blockchain — things like nonfunctional goods within games.

Imagine a kid that spends all his time developing this gaming character and another person that really loves playing a game like Fortnite, for example, but doesn’t have the same amount of time to dedicate to it. In that case, the kid could sell the character to someone who’s willing to pay. And, actually, that’s a good use case for stablecoins — defensible goods within gaming.

AB: How many years do we need for mass adoption?

SW: Most likely, several. There is a lot that needs to happen to the underlying infrastructure, and an amazing amount of things that needs to happen to usability before the average consumer is really using applications.

The interview was conducted at the sidelines of the Crypto Finance Conference in St. Moritz, Switzerland, in January 2019. The panel Sterling Witzke took part in was called “From anarchy to adoption — are we selling out or really creating a better world?”

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Bitcoin (BTC) Price To Recover As Regulation Kicks In – Winklevoss Twins

The Winklevoss Twins say regulation will strengthen trust in the crypto industry and help return bitcoin prices to previous higher levels.

Cameron and Tyler Winklevoss, the owners of the Gemini exchange, flew into the South By SouthWest (SXSW) conference taking place in Austin Texas for their first attendance since 2016.

In their call for tighter regulation the twins cited the missing $194 million at QuadrigaCX as just the latest debacle to beset the industry, with the Mt.Gox implosion the event that set them on the road to setting up Gemini.

“There are a lot of carcasses on the road of crypto that we’ve seen and learned from. At the end of the day it’s really a trust problem. You need some kind of regulation to promote positive outcomes,” said Cameron in comments to Bloomberg.

Checks and balances

His brother Tyler also weighed in. “You want to have a couple of layers of checks and balances. We are here for the long haul.”

Not everyone will agree with those aims, preferring crypto stays as far away from government and regulators as possible.

Although there is no direct quotation, according to the Bloomberg report the twins see regulation as the key to bitcoin price recovery:

Better oversight and compliance will also help Bitcoin’s price recover to prior levels, he said, adding that it may be possible for Bitcoin’s value to increase in the coming years.

The twins inherited their wealth and famously took Mark Zuckerberg to court after accusing him of stealing the idea for Facebook from them.

Their Gemini is regulated and the twins were behind the setting up of a self-regulatory industry body in the US, the Virtual Commodities Association. Prominent exchanges Bitflyer US, Bittrex and Bitstamp are members alongside Gemini.

They are now pushing a global vision for Gemini as crypto seeks to make good on its technological potential to pull the unbanked on the world into the formal economy.

“With a crypto address and a smartphone, all of a sudden you are in the system. We are really just trying to extend the financial system, so you can send dollars anywhere in the world,” said Cameron.

He even went so far as to envision a future in which the main market for value transfer will be between machines, not humans.

Volatility, Europe and robots

“These devices will need to transact value, and they’ll probably talk through companies like Gemini.”

In a separate interview, this time with Yahoo Finance, the twins revealed that the Gemini exchange “is hoping to open in Europe soon”.

They were pushing their new mobile app, launched in December

Asked what they thought about volatility Tyler said: “It’s pretty normal for a new asset to be volatile at different points in time.”

“Overall we end up at a better floor than we started,” added Cameron.

Continuing, he noted “it might be volatile but has moved in the right direction”, pointing out that when they were last at SXSW bitcoin was priced at $400 and is now near $4,000.

The twins took every opportunity to push their products, as we’ve come to expect.

They said the theme in terms of business development for Gemini was  “going global and going mobile”

The Winklevosses shared that they have the UK, Canada, Singapore, Hong Kong, “and some other among other jurisdictions” in their sights for Gemini’s global roll out.

Asked what they thought of the competition from the likes of trading app Robinhood and its proven ability to attract millennials, the twins countered that Gemini is not an equities brokerage but  “a crypto-native company… a custodian, exchange and a platform”.

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Crypto Exchange Gemini Joins British Telecom’s Radianz Cloud Broker Community

Gemini, the cryptocurrency exchange founded by the Winklevoss twins, joined the BT Radianz Cloud broker community.

Gemini, the cryptocurrency exchange founded by the Winklevoss twins, has joined the British Telecommunications (BT) Radianz Cloud broker community, a BT press release reports on Feb. 27.

The Radianz Cloud is described in the press release as “one of the world’s largest, secure networked financial cloud communities,” comprised of thousands of institutions, exchanges, brokers and clearing and settlement houses. Now the members of this community will reportedly have access to the crypto market though Gemini.

Nick Vigier, chief information officer at Gemini, declared that joining Radianz Cloud strengthens the exchange’s institutional investor connectivity. According to Michael Woodman, managing director of BT Radianz:

“global financial institutions have very specific requirements about the performance, resilience and security of the infrastructure over which they trade.”

According to Woodman, Gemini’s membership in the network signals that it can meet the requirements of such global institutions.

According to the section of BT’s website dedicated to the service, Radianz Cloud is used in over 50 countries. An annual report published on BT’s website, claims that it registered 2.97 billion pounds (nearly $4 billion) in normalized free cash flow last year.

BT — which is Britain’s largest internet and telecoms provider — already manifested its interest in blockchain technology in October 2017, when the company secured a patent for its proposed cybersecurity system for blockchain protection.

As Cointelegraph reported at the end of January, Gemini completed a security compliance and data protection audit.

More recently, news broke that United States cryptocurrency exchange and wallet Coinbase has acquired blockchain intelligence startup Neutrino, expecting that the company will help the exchange prevent theft of funds, investigate hacks and ransomware attacks and identify suspicious transactions.

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Winklevoss Twins Unfazed Amid Crypto Winter, Launches Gemini Mobile

Gemini Goes Mobile, Launches Crypto App  

On Tuesday morning, amid a continued imbroglio in crypto markets, New York-headquartered Gemini unexpectedly conveyed a surprising announcement to its following and clients. In a blog post, co-founder and CEO Tyler Winklevoss explained that his upstart would be introducing an in-house mobile platform tied to its flagship product — the world-renowned Gemini Exchange.

Starting today, users of the platform, often lauded as one of Coinbase’s foremost competitors, will be able to download the so-called “Gemini Mobile App” on iOS and Google Play. The application, which joins similar initiatives from Binance, Coinbase, and Poloniex, will purportedly act as an ecosystem to purchase and sell cryptocurrency, a portfolio tracker, price alert provider, and as a pseudo-wallet.

Gemini’s newest program will also facilitate a feature dubbed “Buy The Cryptoverse,” which like Coinbase Bundle and similar vehicles, allows traders to issue basket buy/sell orders for all cryptocurrencies listed on Gemini, weighed by relative market capitalization.

According to Google Play, since the application was released approximately seven hours ago (at the time of writing), it has been downloaded “500+” times. It remains to be seen whether the upstart’s foray into the mobile realm will garner traction from Bitcoin enthusiasts.

Regardless, this endeavor comes down to Gemini’s, and in turn, the Winklevoss Twins’ unrelenting drive for innovation in the cryptosphere, as they see this nascent asset class as the “future of money.” Harvard graduate Tyler Winklevoss, known for his involvement in the controversial Mark Zuckerberg/Facebook case, wrote:

We began our mission to buildthe future of money by creating a licensed cryptocurrency exchange and custodian that allows our customers to buy, sell, and store cryptocurrency in a safe, secure, and compliant manner. A trusted and regulated platform, however, is just the beginning. The future of money is both digital and mobile, and now Gemini is too with the launch of the Gemini Mobile App!

The industry insider closed off the product’s inaugural announcement by claiming that Gemini, which self-describes itself as “the world’s most trusted cryptocurrency platform,” will now be available “into your hands” at a consumer’s beck and call.

The news of this mobile application comes just days after the U.S.-centric platform launched support for Bitcoin Cash (BCH), following its contentious hard fork in mid-November, as reported by Ethereum World News previously.

Winklevoss Twins: “We’re Totally At Home In [Crypto] Winter”

As news broke regarding the product’s launch, Bloomberg released a piece outlining an interview it had with the prominent twins, who reportedly bought up 1% of all Bitcoin (BTC) in circulation following their multi-million dollar settlement with Mark Zuckerberg. Tyler claimed that “we’re totally home in winter,” highlighting the growing sentiment that crypto and blockchain technologies are in the midst of a multi-month lull, as made evident by BTC’s dismal performance.

Yet, like venture capital legend Tim Breyer, the twins seemed calm, adding that 2018’s market tumult has allowed Gemini to “build internally, and refine and kind of catch out breath.” The two went on elaborate on their plans for 2019, claiming that enticing users onto its mobile application will be a priority. The Winklevoss duo added that “a lot of their decisions” have been retail-based, contrary to the sentiment that Gemini is a platform slated for institutional players. As such, the Gemini heads then noted that they intend to make a foray into the Asian Bitcoin market in 2019, hopefully gaining on its crypto competitors in Bitfinex, Digifinex, and Huobi.

In short, Tyler, speaking on behalf of his brother and himself, told Bloomberg:

We’re in this for the long haul… We think it’s a space that’s here to stay

TItle Image Courtesy of Emil Vilsek on Unsplash

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Bitcoin Cash (BCH) Temporarily Overtakes BSV After Gemini Listing

Gemini Adds Bitcoin Cash Support

Starting today, users of the U.S.-regulated, Winklevoss Twins-headed Gemini platform will be able to deposit Bitcoin Cash (BCH), the chain backed by the ABC client. This development comes via an official statement from the New York-based company, issued through Medium on Thursday morning.

Per the announcement, trading for BCH will commence on Monday, December 10th, while custodial services for the popular altcoin have already started. BCH is now the fifth crypto asset listed on Gemini, now an exchange even more exclusive than Coinbase when it comes to listings. BCH joins Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and ZCash (ZEC), the latter of which was recently added to Coinbase in a surprising turn of events.

BCH trading on Gemini was first announced in May, after the startup received approval from the New York Department of Financial Services (NYDFS), but the Winklevoss Twins were mandated to delay the asset’s launch due to the fork.

Closing off its announcement on the matter, Gemini maintained that the addition of BCH is in-line with the startup’s underlying mission. It was explained by Eric Winer, the platform’s Vice President of Engineering:

“We are excited to add this cryptocurrency to the Gemini platform — the world’s most regulated cryptocurrency exchange and custodian. We are proud to provide our customers with a safe, secure, and compliant method to buy, sell, and store cryptocurrency as we build the future of money.”

Abra Reactivates BCH Trading

Just days prior to Gemini’s surprising announcement, American crypto platform Abra, often touted as a Coinbase and Circle competitor, also made a BCH-related announcement, but in a different context.

Through an official company blog post, the Mountain View-based startup first noted that prior to the November 14th hard fork, it suspended its in-house BCH-centric services. But starting last Monday, deposit, withdrawal, and trading support for the controversial asset resumed. The fintech company then issued a comment on why it chose to back ABC, the client of choice of Roger Ver, Bitcoin.com, and Bitmain, as such a decision was likely deemed disputable.

Abra, headed by crypto advocate Bill Barhydt, noted that it is “becoming clear” that ABC is the dominant chain, presumably due to the block lead and higher PoW statistics the fork had at press time. Yet, the popular crypto-centric platform added that it may “consider supporting” BSV, ABC’s primary competitor chain, in the future, dependent on how two chains play off each other moving into the future.

BCH Overtakes BSV After Multi-Week Brawl

For those who aren’t in the loop, amid this week’s market tumult, BSV, backed by the notorious Craig “Faketoshi” Wright and Calvin Ayre, saw a monumental rally this week, moving up the crypto standings faster than many could utter “HODL.”

In a matter of days, if not hours, BSV began to approach the market capitalization of BCH, with many crypto-centric commentators taking to Twitter to express their disbelief, as many thought the civil war between the two factions ended.

As BTC tanked, falling under $3,500, BCH followed close behind the world’s first cryptocurrency. Although many expected for BSV to follow suit, it didn’t, with the forked asset immediately surging, passing the market capitalization of BCH.

However, with Gemini’s stamp of approval, BCH has started to outperform BSV for the first time in days, recently surpassing its competitor in terms of market capitalization.

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Gemini Adds Support for Bitcoin Cash Trading and Custody on the ABC Network

Gemini, a major cryptocurrency exchange and custodian, recently announced it launched support for Bitcoin Cash on the ABC blockchain.

Cryptocurrency exchange Gemini announced support for Bitcoin Cash (BCH) custody and trading today with a post on its official Medium blog, Dec. 8. Gemini, which is based in the United States, was founded in 2015 by the Winklevoss brothers.

The exchange pointed out that, at the moment, it will “only be providing support for the Bitcoin ABC network” which is identified on the platform as “Bitcoin Cash with ticker: BCH.”

Gemini declared that they “are continuing to evaluate Bitcoin SV over the coming weeks or months, and we may or may not choose to support withdrawals and/or trading of Bitcoin SV in the future.”

In order to ensure legal compliance, the company, which claims to be the world’s most regulated cryptocurrency exchange and custodian, reportedly “worked closely with the New York State Department of Financial Services (NYSDFS) to obtain approval to offer Bitcoin Cash trading and custody services.”

Bitcoin SV and Bitcoin ABC are the two blockchains that contended for the Bitcoin Cash name after a controversial hard fork. What was often referred to as a “war” in the crypto community ended when Bitcoin SV backer and billionaire entrepreneur Calvin Ayre declared that the chain no longer wants the Bitcoin Cash name, as Cointelegraph reported Nov. 24.

In October, Gemini gained regulatory approval to offer trading of major cryptocurrency Litecoin (LTC). Gemini’s vice president of engineering Eric Winer noted Gemini’s thoroughgoing “banking compliance and fiduciary obligations” under oversight from NYDFS. He stated that Litecoin trading support came as the result of close cooperation with regulators, and that the exchange is approaching new assets with a “security-first” approach.

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International Crypto Standards: Will They Come From the Community or Governments?

International standards for crypto are coming, but at what cost to innovation?

There are over 2,000 different coins in existence right now, each with their own unique characteristics, uses and communities, while there are masses of different blockchains, platforms and exchanges — all of which answer to competing needs and values. On the one hand, this profusion is one of the key driving forces behind innovation in the crypto sphere. But on the other, it arguably acts as a block against widespread adoption, as the lack of unified standards means that some morally questionable endeavors give the rest a bad name.

The past year has seen an intensifying push toward producing international standards for the cryptocurrency industry. Groups such as Global Digital Finance have risen with the aim of fostering universal standards on how crypto platforms are run, just as groups like the Blockchain Association and CryptoUK are now focused mostly on standards at a national level. Such organizations count the likes of Coinbase, Bitstamp, Circle and others as members, despite often being less than a year old.

However, while holding the promise that crypto will avoid stringent government regulation by learning how to regulate itself, there’s also a concern that global standards might hamper innovation, and that crypto — almost by nature — is not meant to be standardized.

Global Digital Finance

As Teana Baker-Taylor, the executive director of Global Digital Finance (GDF), told Cointelegraph, the London-based association aims “to demonstrate that self-governance and driving best practice is critical for the industry’s consumers and their confidence in crypto assets, as the sector continues to mature, and in concert with developments in regulation.”

In other words, GDF is seeking to develop voluntary guidelines and codes of conduct for exchanges, token sales, wallet providers, cryptocurrencies and ratings websites, and while it was launched only in March, it already has a strong roster of members.

At the end of October, payments company Circle (and owner of Poloniex) joined it as a founder member, adding itself to a list that includes Coinbase, R3, ConsenSys and Diginex. Meanwhile, Baker-Taylor affirms that the association has also begun having dialog with lawmakers and public institutions.

“With over 250 individuals and firms, global regulators and policy makers have paid attention to the GDF Code and the commitment of the community, and this is an important start. Understandably, the signal from many regulators has been mixed, but most we are engaging with are supportive of maintaining an open dialogue to ensure they do not stifle this important innovation.”

Yet, GDF isn’t only working on codes of conduct for token sales and crypto-exchanges. They’re also busy devising a taxonomy of cryptocurrencies, which seeks to divide coins into three broad types: payment tokens, financial asset tokens and consumer tokens.

Given that there is plenty of confusion and conflict among the world’s governments on how to define crypto, this attempt to produce a clear taxonomy of cryptocurrencies is much needed. However, seeing as how such organizations remain largely averse to classifying cryptocurrencies as money and/or assets, there will remain the worry that GDF’s taxonomy (and codes) may simply be disregarded by governments and regulators.

Governments

Despite possible opposition or resistance from governments, the groups like the GDF could have emerged precisely because of increasing government interest in crypto regulation. Anyway, their emergence at such a time presents the crypto world with a golden opportunity to get involved in the shaping of government policy.

In October, the Financial Action Task Force (FATF) — an intergovernmental group established by the G7 to combat money laundering — adopted a variety of changes to its standards concerning the regulation of virtual assets. And encouragingly for the crypto industry, these new recommendations were focused specifically on preventing money laundering and the financing of terrorism, leaving plenty of freedom for exchanges, token issuers and crypto-services to operate in accordance with the needs of their users and own logic. It said in its recommendations from October:

“The FATF Recommendations require monitoring or supervision only for the purposes of AML/CFT [Anti-Money Laundering/Countering Financing of Terrorism], and do not imply that virtual asset service providers are (or should be) subject to stability or consumer/investor protection safeguards, nor do they imply any consumer or investor protection safeguards.”

Put simply, the FATF sees no reason to do anything about the volatility or decentralization of cryptocurrency, which implies that it wants to leave the much of decentralized nature of crypto intact. That said, other governmental groups want to do more than simply prevent crypto from being used for crime or terrorism.

For example, Felix Hufeld — the chairman of the German Federal Financial Supervisory Authority (BaFin) — affirmed his view in October that the global community needs to produce international standards governing the handling of ICOs:

“The number (of ICOs) and the volume (of money) per ICO are both getting higher. Investors have mostly minimal rights.”

Still, while this could foreshadow a push for intergovernmental standards that dictate what ICOs can and can’t do, such moves remain at a very preliminary stage. And because governments have been slow to act here, this provides an empty space which groups like GDF – or the newly formed Blockchain for Europe association (which includes Ripple and the NEM Foundation as members) – could advantageously fill to the benefit of the wider crypto industry.

National beginnings, international endings

And while the world’s governments and governmental bodies slowly wake up to the idea of regulating cryptocurrencies at a global level, the crypto industry is increasingly producing new trade institutions that are beating them to punch when it comes to developing standards.

In March, CryptoUK was established, with the aim of producing self-regulatory standards for the United Kingdom’s cryptocurrency industry. But its chairman, Iqbal V. Gandham, tells Cointelegraph, there’s also an appetite at CryptoUK for international coordination.

“CryptoUK’s focus since our launch earlier this year has been on the U.K. — securing proportionate regulation here is our priority, but we support collaboration on regulatory approaches internationally, in particular learning the lessons — both good and bad — from other jurisdictions.”

Given that most other self-regulatory trade bodies — such as the Blockchain Association, the Japan Virtual Currency Exchange Association and the Blockchain Foundation of India — are working primarily at the national level, global collaboration on regulatory approaches will be vital if the crypto industry is to enjoy uniform international standards.

And to an increasing extent, there does appear to be a growing willingness among crypto-related companies to work with each other on developing (international) standards. In August, the Gemini, Bitstamp, Bittrex and bitFlyer exchanges announced the formation of the Virtual Commodity Association Working Group. And like Global Digital Finance, its aim is to devise global industry standards on how crypto-exchanges are run and cryptocurrencies are traded.

Standards equals less innovation?

There is, then, every reason to believe that the crypto industry will, sooner or later, develop international standards and adopt them at large scale. But the question remains: Will such standards simply give the public greater confidence in crypto, or will they also have the unfortunate side effect of constraining innovation?

“In many industries, regulation and standards are seen as stifling innovation. However, in the crypto-assets market, regulatory and legal ambiguity poses challenges for growth.  Clarity around the ‘rules of the road’ will better enable innovators to access new ways of accessing global capital and support emerging nascent business models with greater confidence.”

– Teana Baker-Taylor, executive director of Global Digital Finance

Similarly, there’s a risk that standards could put compliant companies at a disadvantage compared to those corporations or cryptocurrencies that simply (and perhaps illegally) flout them. Given that the decentralized nature of cryptocurrency provides people and groups with greater scope to disregard centralized authority, this is a real danger.

However, once international standards are in place and recognized, it becomes much likelier that the companies that do observe them will have a much better chance of working with and influencing regulators — something which will ultimately put them at a competitive advantage. And as Teana Baker-Taylor concludes, there’s a very strong appetite among crypto-related firms to foster and follow strong universal standards.

“GDF’s community is made up of hundreds of individuals and businesses from around the world who share a vision of growing a mature, stable, transparent and fair crypto-asset industry. The desire and commitment of the community to instil and drive sound business practices is enormously compelling and in our experience, is far more prevalent than those who do not ascribe to this mindset.”

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Why Bitcoin Dropped by Over 10 Percent, Deleting $40 Billion From Crypto Market, Experts Explain

Four experts speak to Cointelegraph about the 13 percent drop of Bitcoin, evaluating market slump.

Over the past two days, the valuation of the cryptocurrency market has plunged to $201 billion as Bitcoin lost 13 percent, moving closer to its yearly low at $192 billion.

Since Sept. 6 when the price of Bitcoin dropped by more than 10 percent within a one-hour period, the cryptocurrency market has been on a continuous decline. Tokens bled out more intensely than they previously did in April and June, losing out 10 to 30 percent against Bitcoin.

Source: coin360.io

Cointelegraph interviewed ThinkMarkets chief market analyst and former Bank of America trader Naeem Aslam, eToro senior market analyst Mati Greenspan, and well recognized cryptocurrency technical analyst Uzi, delving into the recent drop of Bitcoin and the rest of the cryptocurrency market.

$40 billion drop: One of the biggest daily decline in recent years

On Sept. 6, the cryptocurrency market lost nearly $40 billion from its valuation in less than 24 hours, demonstrating one of the steepest declines in the past three years.

Source: CoinMarketCap.com

In mid August, the cryptocurrency market dropped to its yearly low at $192 billion, but it took seven days from Aug. 7 to Aug. 14 to record such a large drop in valuation.

Prior to Wednesday, throughout the month of August, Bitcoin showed its highest level of stability since June of 2017, as researchers at Diar noted. From Aug. 8 to Aug. 26, the price of Bitcoin remained relatively stable in the $6,000 region, before initiating an overdue corrective rally above the $7,000 resistance level.

Source: CoinMarketCap.com

But, a rushed rally from the $7,000 mark to $7,400 within a four day period led sell pressure to build up, allowing bears in the cryptocurrency exchange market to take over, leading Bitcoin to fall by a large margin.

In late August, ShapeShift CEO Erik Voorhees said that the bear market is not over yet, but the low price range of major cryptocurrencies present a viable opportunity for new investors to come into the market.

The daily chart of Bitcoin demonstrates four similar movements since February. In the past six months, Bitcoin has risen to $10,000, fell to $6,000, recovered to $10,000, and tested the $6,000 resistance level on four occasions.

In February, Bitcoin surged to $11,000 but fell back down to $6,000. In April, Bitcoin rose to $10,000 and dropped to $6,000. In July, Bitcoin rallied to $8,500, only to test the $6,000 resistance level a month later. In September, the same pattern occurs, with each peak on the upside eventually declining $6,000.

Caption: One-day Bitcoin price chart from Cryptowat.ch

If Bitcoin recovers from the $6,000 support level, the next short-term rally could send Bitcoin to $7,000, which may fall back to the $6,000 region. But, if the dominant cryptocurrency can successfully bottom out in the $6,000 region, a possibility for a proper mid-term rally with newly found momentum could emerge.

Factors behind the drop

Speaking to Cointelegraph, ThinkMarkets chief market analyst Naeem Aslam said that speculators have unnecessarily intensified the downtrend of Bitcoin by overselling Bitcoin in the global exchange market.

Aslam emphasized that the downward trend of Bitcoin has not changed since December of 2017, when the cryptocurrency market achieved a $900 billion valuation and initiated a rapid decline:

“Speculators have gone crazy and they are trying to squeeze as much blood out of this trade as they can. Bitcoin hasn’t changed what it was since last December, so what is the panic?”

Aslam added that it is difficult to pinpoint specific factors that have led the price of Bitcoin to drop substantially in recent months.

Analysts and investors in the cryptocurrency market and the broader financial market often attempt to find correlation in cryptocurrency price movements to developments in the cryptocurrency and blockchain sector.

However, correlation is not equivalent to causation, and because an event occurs at a certain time in which cryptocurrency prices fall or surge by a large margin, it does not necessarily mean that the event triggered a big movement in the cryptocurrency market.

TABB Group, an international research company, reported in July that the over-the-counter (OTC) Bitcoin is at least two to three times larger than the cryptocurrency exchange market.

Under the assumption that the OTC market is in fact two to three times bigger than the exchange market of crypto, developments in the cryptocurrency sector should have minimal impact on the price movements of cryptocurrencies — at least in the short-term — as the exchange market depends on the larger OTC market.

Reports have suggested that the correction of Bitcoin initiated on Wednesday was mainly caused by the delay in the decision of Goldman Sachs to launch a Bitcoin trading desk.

It is far-fetching to claim that the decision of a major investment bank to pivot from offering Bitcoin trading services — which may not appeal to its consumer base of institutions and large-scale corporations — to cryptocurrency custodian services led the price of Bitcoin to plunge within an hour.

Rather, it is more likely that the continuous build up of sell pressure on Bitcoin and other major cryptocurrencies since December of 2017 created instability and volatility in the market, causing the valuation of the market to drop.

Because the volume of Bitcoin remains relatively low in comparison to traditional assets and stores of value like gold, it is easier to trigger a domino effect across leading cryptocurrency exchanges.

Goldman Sachs delaying Bitcoin trading desk not relevant

On Sept. 6, Cointelegraph reported that Goldman Sachs has delayed the formal launch of its Bitcoin trading desk that is structured to facilitate rising demand from retail traders and individual investors.

Goldman Sachs spokesperson Michael DuVally told Reuters that the bank has not been able to reach consensus on the roadmap of its digital asset venture, citing various regulatory issues that currently exist in United States markets.

Hours after the statement of DuVally was released, Martin Chavez, the chief financial officer at Goldman Sachs, personally refuted reports that the institution is pivoting away from forming a Bitcoin trading desk operation, characterizing reports around it as “fake news.”

Aslam stated that it is premature to attribute the market’s struggle throughout this week to the delay in the launch of the Bitcoin trading desk operation by Goldman Sachs, as the bank has not closed its operation but merely delayed it to focus on a more urgent initiative that is cryptocurrency custodianship:

“Goldman has only delayed the process, they still have invested a lot of money and talent in this area. Investors must know it is very normal for banks to delay the IPO process if the market conditions are not favorable and over here we are talking about starting something completely new. Goldman has its fingers in many of the areas when it comes to Bitcoin, so stop thinking about it and focus on the price.”

Currently, the cryptocurrency market has a wide range of regulated exchanges in the likes of Coinbase, Gemini, and UPbit that can be used by retail traders to invest in the cryptocurrency market. However, it lacks trusted custodianship and solutions that can break the barrier between cryptocurrencies and institutions.

It can be argued that Goldman Sachs is working on a more urgent issue that needs to be addressed in order to convince the broader financial market and governments to acknowledge cryptocurrencies as an emerging asset class.

As such, while the Goldman Sachs announcement contributed to the fall of the market, as cryptocurrency technical analyst Uzi told Cointelegraph, it is difficult to acknowledge Goldman Sachs as the sole cause for the correction. Bitcoin was already facing resistance around $7,400, the peak it achieved last week before sliding downwards:

“I feel the Goldman Sachs news about them rolling back plans on their crypto trading desk definitely helped trigger the Bitcoin drop, we were facing some tough resistance around $7,400 as well, but it’s not the biggest secret in the world that a massive amount of BTC shorts was added on Bitfinex days before this drop. 10K BTC in shorts, I believe — follow the money, as they say.”

Same bear trend since February

Mati Greenspan, a senior analyst at eToro, one of the largest multi-asset trading platforms in the global finance sector, with eight million active users, echoed the sentiment of Aslam by stating that the cryptocurrency market has been in a similar trend over the last few months, unable to break out of the $8,000 resistance level with solid volume and momentum:

“Volatility in the crypto markets has picked up over the last few days but is still pretty normal for this market. As far as Bitcoin’s price is concerned, the price has been in a rather stable range between $5,000 and $8,000 for the last few months and this hasn’t changed.”

Greenspan added that the volatility in the market can be attributed to the lack of demand from traders in the cryptocurrency sector, rather than specific events which analysts have pinpointed as the primary cause of the recent correction.

“Several possible reasons for the drop could be a few bad rumors that are circulating in the press, along with a stronger dollar and weakness in tech stocks. Ultimately though, it’s simply a matter of more supply and less demand in short-term trading.”

Technical analyst says Bitcoin market is illiquid, fake volumes

Bitcoin is not considered a sufficiently liquid market, especially considering the fact that its exchange market is open to any individual investor and retail trader in the global market. While cryptocurrency market data providers estimate the daily volume of Bitcoin to be around $5 billion, studies have shown that most major cryptocurrency exchanges inflate their volumes through wash trading.

Alex Kruger, an economist and a cryptocurrency trader, stated earlier this week that Bithumb, South Korea’s second largest cryptocurrency exchange behind Kakao-run UPbit, said that more than $250 million worth of fake volume was created since Aug. 25.

He explained that one group of traders has been taking advantage of Bithumb’s 120 percent trading fee payback, which can generate about $90,000 in net income, with a $250 million daily trading volume.

“There currently are $250 million [in] fake volume traded at [the] Korean crypto exchange Bithumb, every day at 11 a.m. Korean Time, since Aug. 25. Bithumb offers 120 percent payback of trading fees as an airdrop. Trading fees are 0.15 percent taker. To collect the full KRW 1 billion rebate, a wash trader must thus trade KRW 278 billion. That is $250 million in daily fake volume. Notice how 31K Bitcoin are traded at exactly 11 a.m.”

Directly or indirectly, the method utilized by Bithumb has incentivized wash trading that bumps up the daily trading volume of the cryptocurrency exchange. The end outcome is a daily net income of $90,000 for a group of traders and a significant increase in the daily trading volume of Bithumb.

However, while the method leads to a win-win situation for both parties, it affects the global cryptocurrency exchange market in a negative way — as it reduces the authenticity of the international trading volume of cryptocurrencies.

Uzi stated that liquidity and fake volumes are two problems that cryptocurrency exchanges will have to address urgently, to ensure that investors in the market are protected and governments can recognize the sector as a legitimate industry:

“Solving the liquidity issue is one that needs to be tackled, and the issue of fake volume is something that needs to be addressed on a larger scale, because there are definitely questionable volumes on major exchanges.”

Uzi also noted that the Bitcoin market is still generally illiquid, given the lack of activity from institutions and large-scale hedge funds in the sector. He stated that the market is still not ready to support big demand from institutional investors, and most short or long contracts around Bitcoin filed through the U.S. futures market or cryptocurrency exchanges are done by individual investors.

“I have always felt the market for Bitcoin is still illiquid, and especially if you look at the altcoins market. I don’t feel any professional institution would take up a short position at that time on Bitcoin just out of the sheer volatility and the momentum it had testing a decent resistance, as well as the massive short being opened that was noticeable to most, it would be terrible risk management.”

Where the market goes next with Coinbase ETF variable

As Cointelegraph reported on Sept. 7, the world’s largest asset manager BlackRock, which oversees $6.317 trillion in assets, and Coinbase, the cryptocurrency sector’s biggest exchange and brokerage, are in talks to develop a cryptocurrency-based exchange-traded fund (ETF) to bolster market activity and facilitate growing demand from institutions for cryptocurrencies.

The entrance of VanEck and the Chicago Board Options Exchange (CBOE) has already increased the probability of the approval of the first Bitcoin ETF by the U.S. Securities and Exchange Commission (SEC). The involvement of BlackRock will create more competition in the Bitcoin ETF space among U.S.-based regulated financial institutions, which may lead to more contenders filing with the SEC to improve the liquidity of the dominant cryptocurrency.

Variables like Bakkt, the Coinbase-BlackRock ETF and positive regulation-related developments in Japan and South Korea could contribute to the recovery of the cryptocurrency in the short-term, which previous corrections in 2012, 2014, and 2016 did not have.

Experts generally agree that the correction of the cryptocurrency market on Sept. 6 was caused by increasing sell pressure and a culmination of various developments, rather than a single event like the Goldman Sachs Bitcoin trading desk announcement having an immense impact on a global market.