Cryptocurrency markets continued to lose ground last week, with bearish sentiment being strengthened following the 35 billion won ($31 million) hack of South Korea’s Bithumb exchange. The sixth-biggest cryptocurrency trading venue in the world, Bithumb’s attack continues to underline the precariousness of storing cryptocurrency on centralized exchanges . Starting the week at $280 million in total market cap, crypto markets lost around $30 million during the seven days, with a pronounced sell-off occurring towards the end of the week, following the hack.
South Korea Announces Blockchain Technology Development Strategy
Despite the overall losses, however, there was much to be optimistic about during the week as far as blockchain development is concerned. For instance, South Korea continues to show its global leadership leader in blockchain development, with the country’s Ministry of Science and ICT announcing on Thursday that it was launching a 230 billion Won ($206 million) Blockchain Technology Development Strategy. The government intends to develop 10,000 industry professionals and 100 companies as part of the programme, as well as expand and commercialize six existing blockchain pilots with the Ministry’s backing across a diverse variety of sectors: real estate, online voting, marine logistics, livestock record management, customs clearance and international e-document distribution.
The Ministry also states that private blockchain initiatives will be promoted including smart cities, smart factories, a blockchain system for the used car industry, and a blockchain-based “safe school food” distribution initiative. The other major initiative under this strategy is to support the development of Blockchain-as-a-Service (BaaS) to assist those companies developing blockchain. The ministry will specifically do so by providing around 10 BaaS purchase vouchers that guarantee government payments to small and medium-sized enterprises (SMEs) on a yearly basis.
Crypto ETP
Could we be moving a step closer to the creation of a crypto exchange-traded fund? At this stage, it’s unclear, but news last week that the Winklevoss twins had won a patent from the U.S. Patent and Trademarks Office for a system to provide crypto-based exchange-traded products (ETPs) certainly adds to the speculation. The new patent is for systems using ETPs that hold “digital assets” and “other products and/or services related to ETPs holding digital assets,” and was initially filed last November by Winklevoss IP.
At this stage, it is not exactly clear how the patent can be used for investment products in the real world, although specific cryptocurrencies are mentioned including well-known currencies such as Bitcoin, Ethereum and Ripple, as well as lesser known ones like Liquidcoins, BBQcoins, BitBars and PhenixCoins. Nevertheless, the recent win can be added to a mounting list of approved patents that have been amassed by the Winklevoss twins recently – seven in total since December. Last month, for instance, they won a patent for a system that settles transactions for ETPs tied to cryptocurrencies.
Privacy Coin Regulation
Following Japan’s recently enacted exchange ban, privacy coins such as Monero and ZCash are now under close scrutiny in the US. In his written testimony to Congress on Wednesday, the deputy assistant director of the US Secret Service’s Office of Investigations, Robert Novy, requested for assistance in preventing the use of such coins for illicit purposes. According to Novy, “We should … consider additional legislative or regulatory actions to address potential challenges related to anonymity-enhanced cryptocurrencies.” This view was also supported by Greg Nevano from the investigations division of Immigration and Customs Enforcement, who stated that anonymity-enhanced cryptocurrencies “are clearly ripe for illicit use in an effort to subvert legitimate law enforcement inquiries,” and that although tracing the movement of illicit funds using privacy coins is difficult, it is “not impossible.”
The privacy features of such coins are clearly attractive to criminals. But whether they will be used for large-scale illegal activity remains to be seen at this stage. Some members of Congress believe so, with Robert Pittenger of North Carolina declaring during the hearing that the illicit use of cryptocurrencies represent “one of the greatest emerging threats to U.S. national security…”. The US Financial Crimes Enforcement Network (FinCEN), meanwhile, is also supportive of further regulation, with associate director Thomas Ott acknowledging that while traditional financial methods remain the primary vehicle for most illicit activity, without “vigilance and action” the scale of crypto-related financial risks is likely to grow.
4 Cryptos Added to FRED Database
On Tuesday, the Federal Reserve Bank of St. Louis’ research division added 4 cryptocurrencies to the Federal Reserve Economic Data (FRED), a database once described by the Washington Post as “something of a mecca for economics,” given its huge importance in supporting the global finance industry. As such, FRED now includes “four series on the prices of different cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, and Litecoin,” with data primarily taken from popular crypto exchange Coinbase. The data reportedly spans several years, while FRED also provides price data for the Coinbase Index, which tracks the performance for the four currencies. And although only four coins have been added to the much-vaunted database, the mere inclusion of this data by one of the world’s most powerful financial institutions is surely a good sign for the legitimization of cryptocurrency.
