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Chinese City Is Using Blockchain to Track Convicts on Parole

Convicts on parole in the southern Chinese city of Zhongshan can now find themselves being tracked over a blockchain network.

The justice department of Zhongshan says it has launched a blockchain-based system that can monitor the movements of ex-prisoners to improve the quality of so-called “community correction,” a local media source reported on Thursday.

The technology has apparently been deployed across various community service centers where parolees are required to check in and complete daily duties.

The department said it developed and applied the blockchain system in an effort to provide up-to-date data on each convict’s movements around the clock.

Since convicts’ data is updated in a distributed fashion, community correction staff and relevant law enforcement agencies who are given access to the network are able to know a convict’s whereabouts at any time, and thus can take necessary measures if one is breaking from the required routine.

The justice department claimed that the technology is able to reduce the manpower burden that is traditionally required to physically follow parolees when ensuring they are obeying laws and performing community service.

The Zhongshan implementation is the latest use case in which blockchain is being adopted in the legal system in China.

As CoinDesk previously reported, an internet court in the city of Hangzhou has already recognized the nascent technology as an authorized way for evidence deposition.

The major city of  Shenzhen is also turning to blockchain in the fight against tax evasion, a move made in partnership with internet giant Tencent.

City image via Shutterstock

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Russian Agency to Track Crypto Wallets of Criminal Suspects

Rosfinmonitoring, the Russian government agency responsible for monitoring and preventing financial crimes in the country, is seeking to expand its internal systems to account for cryptocurrencies.

The order, first reported earlier this week by the BBC, indicates that the agency wants to beef up its ability to monitor alternative types of transactions, including those made with cryptocurrencies. According to the publication, an improved system allowing for data about crypto wallets tied to certain individuals is being developed by Moscow Institute for Security and Information Analysis (SPI), with a price tag of roughly 195 million rubles (or about $2.8 million).

According to documents published through an electronic auction system that registers purchases and purchase requests from Russian agencies, Rosfinmonitoring should get the updated system before the end of the year.

The SPI has created other law enforcement-focused tools in the past, according to the BBC. Outside of the documents, not much is known about the scope of the initiative, and the SPI didn’t respond to a request for comment.

Rosfinmonitoring declined to reveal any details about its crypto-monitoring capabilities, with its press office saying in an email that information about the system is classified.

That the agency would solicit such functionality is perhaps unsurprising, and its work could one day fit into a wider regulatory framework within Russia. As previously reported, policymakers and legislators in the country have gone back and forth on the question of cryptocurrency oversight. Last year, for example, it was reported that Rosfinmonitoring could play a possible role in monitoring transactions on regulated cryptocurrency exchanges.

Yet the criteria for how that information would be added to Rosfinmonitoring’s systems isn’t clear. In recent years, the number of people placed on the agency’s list has been tabulated by those who have been charged over social media posts that are considered extremist or anti-religious in nature.

Right now, the list of individuals whose accounts have been blocked in Russia due to terrorism charges includes 8,600 people. The list of entities has 485 entries, with most of them being various Russian religious organizations. The database also lists 101 foreign entities and 415 foreign individuals.

Image via Shutterstock

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German Authorities Sold $14 Million in Seized Cryptos Over Price Fears

Concerns over high price volatility have prompted prosecutors in Germany to make an emergency sale of seized cryptocurrencies worth over €12 million (around $14 million).

Local news source Der Tagesspiegel reported Monday that Bavarian prosecutors ordered the sale on Feb. 20. At the time, bitcoin’s price had rebounded to nearly $10,000 after hitting a yearly low of $5,947 on Feb. 6, according to CoinDesk’s Bitcoin Price Index.

Taking nearly two months to complete, the sale reportedly disposed of 1,312 bitcoins, 1,399 bitcoin cash, 1,312 bitcoin gold and 220 ether via over 1,600 transactions on a German trading platform.

The cryptocurrencies were all seized during two ongoing investigations being conducted by Bavarian cybercrime agencies. Although the prosecutor has not yet brought charges in the two cases, German legislation allows for emergency sales if assets seized in ongoing investigations face an immediate threat of loss of value, according to the report.

“Since all cryptocurrencies are exposed to the risk of high price fluctuations or even total loss, the Bayern Central Office of Cybercrime ordered an emergency sale,” the state prosecutors explained in the report.

Following the sale, the office has yet to determine how to handle the proceeds, since it remains unclear whether the prosecutor will move forward with the investigations.

At the end of last year, the Central Office of Cybercrime in Germany’s Hesse state also made a notable sale of 126 bitcoins confiscated over several years through investigations on the darknet. At the time, bitcoin’s price was around its all-time-high at $20,000, which resulted in proceeds of nearly $2.3 million, according to an earlier report from Der Tagesspiegel.

German police image via Shutterstock

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Justice Department Veteran Backs Bitcoin Crime-Fighting Tool

Blockchain services provider Bitfury has hired an 11-year veteran of the U.S. Department of Justice to lead the American push of its bitcoin blockchain tracking product, Crystal.

Bitfury announced Friday that Michael DuBose, who led the DoJ’s Computer Crime and Intellectual Property section from 2000-2011, will be joining the firm as president of Crystal USA, where he will “help introduce Crystal … to U.S. law enforcement agents, financial groups and other key audiences,” according to a company statement.

“I am thrilled to play a key role at Bitfury leading business growth for Crystal,” DuBose said Thursday. “Crystal makes it much easier to identify and track criminal activities on the blockchain, thereby providing a vital service to law enforcement agencies, financial institutions and other groups across the United States.”

Bitfury, which also provides bitcoin mining hardware, first unveiled Crystal in January, offering a way for firms and law enforcement agencies to track transactions on the bitcoin blockchain. The software scores transactions and addresses according to their risk, flagging bitcoin movements that may be associated with illegal activities, for example.

According to Bitfury, the tool can help the authorities speed up their investigations into illicit activities involving the cryptocurrency. The firm’s website says that it took just three hours to find the entity behind the $5 billion WannaCry ransomware attacks last May.

“If law enforcement agencies had had the proper tool to find criminals on the Bitcoin Blockchain,” the company said in a presentation, “they could have quickly cornered the criminals and prevented further global damage.”

Bitfury also markets Crystal to companies, which face potential legal repercussions for accepting bitcoin derived from black market activities. Using Crystal, Bitfury CEO Valery Vavilov told CoinDesk in January, “you can track bitcoin transactions and see if this bitcoin address that you’re getting money from is green or black.”

DoJ image via Shutterstock

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Korea's Biggest Crypto Exchange Raided Over Suspected Fraud: Report

Prosecutors in South Korea have reportedly raided the largest cryptocurrency exchange in the country, UPbit.

According to CoinDesk Korea, investigators from the Prosecutors’ Office of the southern district of Seoul, the country’s capital, searched the head office of the exchange in the Gangnam-gu district on May 10-11.

UPbit is suspected of fraud for allegedly selling cryptocurrency to customers that it does not actually hold, according to the report.

The Prosecutors’ Office stated:

“We have secured hard disks and accounting books through confiscation. Analysis is expected to take days. “

When asked for comment by CoinDesk Korea, an UPbit representative said, “At this time, I can not answer anything about this seizure.”

The news comes as authorities in the country have been investigating cryptocurrency exchanges amid regulatory tightening in the country.

In March, prosecutors reportedly raided the offices of three unnamed cryptocurrency exchanges on suspicion of siphoning off funds from customers’ accounts.

South Korean flag and BTC image via Shutterstock

Edited (08:55 UTC): This article has been edited to clarify the the reason for the raids

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China's Police Ministry Touts Blockchain for Secure Evidence Storage

China’s Ministry of Public Security has developed a blockchain system aimed to more securely store evidence collected during police investigations.

According to data released by China’s Intellectual Property Office on Tuesday, the ministry’s research arm filed a patent application in November 2017 for a blockchain-based system that timestamps and stores data submitted to the cloud in a bid to provide a more transparent and tamper-proof deposition procedure.

With centralized cloud platforms becoming an increasingly popular way to share data, the ministry – which supervises all China’s police forces – said a potential problem with the current deposition process is that evidence sent via cloud providers could easily be altered.

In addition, the lack of an efficient technology to provide clear supervision of the cloud storage process could also make the deposition process less reliable.

As such, the patent sets out a blockchain system that would initially request that cloud providers be sent deposition data, which, after receiving multi-signature confirmations from both parties, would be recorded and timestamped on a blockchain. In this way, the system would provide an immutable copy of the data, as well as who initiated the transaction and the time and date it occurred.

Although the technology described in the application doesn’t appear to be entirely novel, given it largely reflects the basic mechanisms of standard blockchains, it still marks a notable use case exploration by one of the 26 cabinet-level ministries of China’s State Council.

Further, the Ministry of Public Security is not the only Chinese government agency that is interested in taking advantages of blockchain technology.

As reported previously by CoinDesk, China’s National Audit Office, another cabinet-level ministry and also the government’s official auditing authority, is also looking at blockchain solutions for storing audit data it gathers from provincial and local level bureaus.

See the full patent application below:

China police image via Shutterstock

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I'll Give You My Bitcoin When You Pry It From My Cold, Dead Hands

Marc Hochstein is the managing editor of CoinDesk and the former editor-in-chief of financial industry publication American Banker.

The following opinion piece originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday, exclusively to our subscribers.


Every once in a while, it’s useful to revisit the core value propositions of cryptocurrencies.

One of the most underappreciated, at least outside of the technology’s inner circles, is the fact that bitcoin and the like can give individuals a greater degree of financial autonomy.

The reason it’s underappreciated, I suspect, is that like privacy, autonomy is one of those qualities no one cherishes – until it’s gone.

Be your own bank? Really?

Stepping back, “be your own bank” is a favorite slogan of the early cryptocurrency adopters. This baffles bitcoin skeptics, and understandably so.

Key management is a fussy businessnerve-racking and all too easy to screw up. Some digital currency doubters say it’s simply beyond the skill set of the average consumer.

There’s a whiff of paternalism in that claim, though. After all, people still cook for themselves (an activity that involves knives, fire and sometimes animal bacteria!) and drive their own cars (for now); how much harder can it really be to make up a random string of words and keep it a secret?

Then again, why would anyone want to bother with paper wallets or mnemonic recovery phrases when they can just store their money at a bank, a business that specializes in safekeeping? Here in the U.S., your balance is insured up $250,000 by the FDIC in the event the institution fails.

You might even earn some paltry rate of interest on your money, along with peace of mind unimaginable at a bitcoin exchange. (Don’t worry, the banker probably won’t set up an unauthorized account in your name to hit a sales quota.)

From this narrow perspective, being your own bank looks like way more trouble than it’s worth.

An insurance policy

But let’s zoom out the lens a bit.

Consider the slow but steady erosion of due process and property rights in the Land of the Free through policies such as civil asset forfeiture (in which law enforcement can seize assets from citizens suspected of committing a crime, whether or not they have been convicted or even charged).

Next, consider the lack of constitutional protections to begin with in many other countries. Finally, layer on top of these unsettling realities the worldwide gradual phasing out of physical cash, which at least you can put in your socks.

All of a sudden, those trusted, regulated financial institutions start to look like potential back doors.

In this light, the mere option of being your own bank, for at least a portion of your wealth, starts to sound a little bit more appealing.

Untouchable money

Inb4 the strawmen: I am not claiming that cryptocurrency users are “above the law.” An individual who refuses to give up his private keys under court order can still be thrown in jail.

The point is that the government has to throw that person in jail, or perhaps beat him with the proverbial rubber hose, to get him to comply. It can’t unilaterally seize his funds.

A defiant crypto holder might borrow a slogan from the late actor and gun-rights advocate Charlton Heston…

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In this way, cryptocurrency claws back a modicum of power for the individual.

The historical significance of this innovation – self-sovereign money – was explained beautifully in a blog post by Nathan Cook, a bitcoin user in Tel Aviv.

In a post, first published two years ago, he wrote:

“An owner of bitcoin no longer has the problem faced by the owner of any other transferable asset: ‘will my property rights be respected?’ Holders of bitcoin own it in virtue of material facts independent of their social relations. The world may turn its back on bitcoin, yea, its value may fall to fractions of a cent, but those who own it, will own it regardless.”

Just to be clear: this is hardly a reason to empty your checking account or 401(k) and put it all down on crypto (another strawman I encounter frequently on social media).

But it’s a damn good reason to be thankful bitcoin exists in the world.

Skeleton hand image via Shutterstock

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33 Cases: Cryptocurrency Fraud Is on the Rise in Japan

Japanese consumers reported 33 cases of cryptocurrency-related fraud in the first seven months of 2017, representing more than half a million dollars-worth of losses.

According to reports from Nikkei and The Yomiuri Shimbun, the National Policy Agency (NPA) reported roughly ¥76.5 million ($710,848) in fraud-related thefts between January and July. The pace of those complaints appears to have picked up as the year progressed – corresponding to the rising cryptocurrency market – with ¥17.3 million reported stolen in July alone.

The cases involved cryptocurrencies like bitcoin, ether and Ripple’s XRP, the reports said, with the majority of the year’s reports thus far relating to thefts of bitcoin.

According to The Mainichi, another Japanese newspaper:

“Damages by virtual currency up to June 2017 were the most for Ripple, at 29.6 million yen, followed by bitcoin at nearly 29.3 million yen. Damages in other currencies ethereum and NEM amounted to 200,000 yen and 100,000 yen, respectively, among others.”

The article notes that while many of the victims’ accounts did not have two-factor authentication implemented, at least three accounts did. Two-factor authentication provides an extra layer of security to digital accounts, and requires a digital token to be able to log into an account.

The NPA did not reveal how the cryptocurrency thieves bypassed two-factor authentication to transfer the funds. And to date, none of the funds identified have been recovered. According to The Mainichi, the police agency said the stolen funds may have already been converted to other forms of money, including cash.

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Ripple.

Japanese police image via cowardlion/Shutterstock

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