Tag: Bitcoin

1
New FCA “Dear ICO” Letter warns of financial crime associated with cryptocurrencies
2
Weather Bureau IT mining cryptocurrencies?
3
Hacking of digital currency exchange leaves Japanese company footing the bill
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Is Bitcoin Islamic-compliant?
5
Meet us at Money20/20!
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Tax-free cryptocurrency transactions could come with reporting obligations
7
Cryptocurrencies becoming more mainstream?
8
Going Dark: The use of anonymizing technologies in Dark Web crimes
9
FCA discussion paper on distributed ledger technology
10
Bitcoin operators exposed to cyber threats

New FCA “Dear ICO” Letter warns of financial crime associated with cryptocurrencies

By Judith E. Rinearson and Rizwan Qayyum

On June 11 2018, the Financial Conduct Authority (the “FCA”) issued a “Dear CEO” letter, which provided guidance for banks on how to handle the growing risks associated with “cryptoassets”.

The FCA defines “cryptoassets,” using Bitcoin and Ether as an example, as “any publicly available electronic medium of exchange that features a distributed ledger and a decentralised system for exchanging value.”  While acknowledging that there are “many non-criminal motives” for using cryptoassets, the letter asserts that these products can be abused because they offer “potential anonymity and the ability to move money between countries.”

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Weather Bureau IT mining cryptocurrencies?

By Cameron Abbott and Allison Wallace

The Australian Federal Police are investigating two members of the Bureau of Meteorology’s IT team for allegedly running an operation in which they made use of the Bureau’s powerful computers to “mine” cryptocurrencies.

It was revealed late last week that the AFP raided the Bureau’s Melbourne CBD offices on February 28, and questioned the two employees. No charges have been laid, or arrests made. Read More

Hacking of digital currency exchange leaves Japanese company footing the bill

By Cameron Abbott and Allison Wallace

Coincheck – one of Japan’s largest digital currency exchanges – says it will repay hundreds of millions of dollars’ worth of virtual money, after hackers broke into its network, stealing a reporting 58 billion yen (AUD660 million) worth of NEM (a cryptocurrency like Bitcoin).

Hackers broke into the Coincheck network early Friday morning, but it wasn’t discovered until nearly eight and a half hours later. Read More

Is Bitcoin Islamic-compliant?

By Jonathan Lawrence

In a recent research paper, Mufti Faraz Adam has considered whether Bitcoin is Islamic-compliant. This is an important area of interest given the growing Islamic finance market which is expected to be worth more than US$6.5 trillion by 2020. The paper examines whether Bitcoin is money, a commodity or something else entirely.

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Meet us at Money20/20!

K&L Gates is excited to be a part of Money20/20, the largest global event focused on payments and financial services innovation! Join us from October 22nd – 24th in Las Vegas, U.S.

We have several exciting events and programs taking place during the conference.

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Tax-free cryptocurrency transactions could come with reporting obligations

By Elizabeth C. Crouse, Mary Burke Baker, Robert M. Crea, Claire S. White and Rachel D. Trickett

As cryptocurrencies such as Bitcoin and Ethereum become more prevalent in investment circles and acceptable for commercial transactions, the U.S. Internal Revenue Service (IRS) has said little other than to label “virtual currencies” as property and state that transactions involving virtual currencies may be subject to taxation under generally applicable law. However, on September 7, the Congressional Blockchain Caucus introduced the Cryptocurrency Tax Fairness Act which would exempt certain cryptocurrency transactions and create a cryptocurrency-specific information reporting requirement.

To read more about this update, click here.

Cryptocurrencies becoming more mainstream?

By Jim Bulling and Michelle Chasser

Steps have been taken this year in Japan and Norway towards the integration of digital currencies such as Bitcoin into the mainstream financial sector. Japan has amended financial laws to include coverage of digital currencies as a type of ‘prepaid payment instrument’, and an online bank in Norway has announced plans to offer clients the ability to link their bank accounts with cryptocurrency accounts.

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Going Dark: The use of anonymizing technologies in Dark Web crimes

Like an iceberg, the majority of the internet is concealed from plain sight.  The “Dark Web,” or websites and content that use anonymizing networks to provide untraceable access to unindexed sections of the web, comprises a segment of what lies beneath that which is visible through a Google search.  Cliff Histed and Nicole Mueller contributed an article to American Lawyer on this topic. The article contains insight into the concerns shared by former FBI Director, James Comey, as well as European law enforcement authorities.

To read the article, click here.

FCA discussion paper on distributed ledger technology

By Jacob Ghanty 

The FCA has published a discussion paper (DP) on the potential uses of distributed ledger technology (DLT) in financial services.  The purpose of the DP is to start a dialogue on the risks and opportunities in relation to DLT.  The FCA has gained exposure to DLT through its Regulatory Sandbox initiative.

The FCA describes DLT as “a set of technological solutions that enables a single, sequenced, standardised and cryptographically-secured record of activity to be safely distributed to, and acted upon by, a network of varied participants.”  It states that industry efforts to investigate DLT have become especially concentrated over the past 24 months and, in the second half of 2017 into 2018, it expects to see firms moving on from “Proof of Concept” to “real-world” deployment of this kind of technology.

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Bitcoin operators exposed to cyber threats

By Cameron Abbott and Rebecca Murray

Reuters has reported that a third of bitcoin trading platforms have been hacked, and nearly half have closed since they entered the scene 6 years ago. This increasing risk for bitcoin holders is compounded by the fact there is no depositor’s insurance to absorb the loss. That approach heightens cybersecurity risks and also exposes the fact that bitcoin investors have little choice but to do business with under-capitalized exchanges.

This issue was evident when Bitfinex was hacked earlier this month and an estimated $70 million in bitcoin was stolen. The virtual bank’s customers were forced to share the losses resulting in a generalized loss percentage of 36.067%. Read our blog post on this hacking here.

Experts say trading venues acting like banks such as Bitfinex will remain vulnerable. These exchanges act as custodial wallets in which they control users’ digital currencies like banks control customer deposits. However, unlike their brick-and-mortar counterparts, when customers’ bitcoin accounts are hacked, there is currently no third party that can step in to deal with the theft. As a result, these underfunded exchanges require nearly perfect security.

Given this it is not surprising that certain governments around the world are exploring the possibility of central bank issued digital currencies using distributed ledger technology which could compete with the private digital currency systems such as bitcoin. Read more on this here.

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