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Nasdaq Bitcoin Futures Confirmed

Nasdaq Bitcoin Futures Confirmed

Just last week, Bitcoin News reported Bloomberg’s findings on the world’s second largest stock exchange’s plan on moving forward with Bitcoin futures listing. This week, Nasdaq has cleared the air of all speculation by confirming this.

UK news outlet Express heard it from the horse’s mouth yesterday that Nasdaq would definitely be launching its Bitcoin futures within the first half of next year. This was obtained from two credible inside sources from within the organization.

Vice president of Nasdaq’s media team Joseph Christinat told an Express point man: “Bitcoin Futures will be listed and it should launch in the first half of next year – we’re just waiting for the go-ahead from the CFTC but there’s been enough work put into this to make that academic.”

Christinat added, “We’ve seen plenty of speculation and rumors about what we might be doing, but no one has thought to come to us and ask if we can confirm it, so, here you go – we’re doing this, and it’s happening.”

The current market trends might just be in need of a good news as this, in particular, is of more interest to institutional investors. However, this has a way of rippling into other mainstream financial affairs. The most likely of all institutions to feel the most impact would be traditional banking institutions, as the move will enlighten them on the serious roles cryptocurrency has in the future of finance. More so, it may be a step closer to legitimizing the market.

From Joseph’s statement, it would seem that they are no strangers to the development of both the blockchain technology and the cryptocurrency market, as he does emphasize on the efforts of the exchange toward engaging with the new venture.

“We got into the blockchain game five years ago, and when the technology first popped up we just leaned out of the window and shouted “hey come over here” right at it.”

However, the most assuring is that the exchange has spent so much on achieving this milestone:

“We’ve put a hell of a lot of money and energy into delivering the ability to do this and we’ve been all over it for a long time – way before the market went into turmoil, and that will not affect the timing of this in any way. No. Period. We’re doing this no matter what.”

Right now, all that’s left for the exchange is the final confirmation from the CFTC. This would also be the case with other players who are currently looking to launch their Bitcoin futures too. In the case of VanEck partnering with SolidX for a physically-backed Bitcoin exchange-traded fund (ETF), they are simply waiting on the US Securities and Exchange Commission (SEC) for approval.

 

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Nasdaq Full Steam Ahead on Bitcoin Futures, New Target Q1 2019

Bloomberg has reported that Nasdaq Inc has decided to move forward with its plans to list Bitcoin futures and this could happen as soon as the first quarter of 2019.

Nasdaq is following up on its initial plans in November 2017 to launch Bitcoin futures in 2018, doing so in the hopes of sustaining a long-term cryptocurrency patronage. However, it failed to execute its original plans, committing to satisfy the standards imposed by the US financial regulator Commodity Futures Trading Commission (CFTC).

Bitcoin futures were thought to be instrumental to the astronomical rise of the price of Bitcoin last year, with the market registering price verticals as high as USD 20,000. The first two derivative markets to launch the bitcoin futures were CBOE Global Markets Inc and CME Group Inc, after which the CFTC decided to review the processes for listing crypto derivatives.

Nasdaq’s decision comes as a bold move considering the current market conditions, as Bitcoin has dropped from its all-time high and now trades as low as USD 4,000.

The current market conditions seem to have fallen short of the initial expectations that institutional investments attracted by the Bitcoin futures contract would be the sustaining wave for the next cryptocurrency mass adoption. However, this year’s market has only been in the reverse. Still, institutional investments remain a topic of focus as speculation on them make headlines daily.

Moving forward, it does seem as though Nasdaq had been brewing on its plans to ensure that it meets the demand of a wide range of investors and ensure that its contracts services are foolproof, thereby outpacing its competitors. This was disclosed by an unnamed source reported by Bloomberg who said:

“The Nasdaq futures will be based off the Bitcoin’s price on numerous spot exchanges, as compiled by VanEck Associates Corp… CME uses prices from four markets, while it’s just one at Cboe.”

On a general note, Nasdaq has shown a keen interest into blockchain technology as a whole alongside the derivative systems, even considering the possibility of a Nasdaq cryptocurrency exchange in the future.

 

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Identification, Tax, Self-Regulation Named Emerging Trends in Crypto Regulation

Ex-senior official at the US Commodity Futures Trading Commission (CFTC) Jeff Bandman recently shared his expectations on the future of cryptocurrency regulations, pointing to identity checks, a clearer tax obligation, and industry self-regulation as trending areas.

Bandman said that a turning point for cryptocurrency regulation came in 2013 when the US government auctioned off the substantial amount of confiscated Bitcoin seized in dark web outlet Silk Road’s closure.

”When the US government seizes narcotics they don’t auction it off to the American people, to me that was a real watershed moment,” he said, interpreting this as the government’s acknowledgment of it as something legal.

KYC, AML

The area where Bandman sees greatest conversions is that surrounding around anti-money laundering (AML) and terrorist financing. Although he acknowledged that people are laundering at higher levels with cash than cryptocurrencies, he cites that statistically GBP 100 billion is estimated as launder in Europe every year, with around GBP 3 or 4 billion of that laundered in cryptocurrency. ”That’s still a lot and governments around the world are focusing on that,” he clarified.

”It’s a big theme as we go through 2018 and in to 2019… country by country mainstream departments of finance and justice will be handling this alongside an international group called the Financial Action Task Force which will have new standards by June.”

For businesses in this space, compliance to tighter regulation will be a core theme; ”whether or not you think its appropriate considering other certain software or consumer products are subject to KYC (know your customer) or AML at this level, it will be the defining characteristic for these types of assets.”

Taxes

Bandman noted that taxing cryptocurrency came to the US government’s attention in 2013, 2014, although there was and still is no consistent treatment globally. Each country is trying to deal with taxation, albeit in different ways, he said with the common denominator being a lack of clarity and consistency.

He gave the example of France’s intention to impose a 20% capital gains task on cryptocurrency which taxpayers are still unclear of on the logistics; whether it relates to corporate income or just capital: ”If buying a coffee with Bitcoin is there going to be gains or losses in that transaction or is that an exemption?”

”Crypto businesses and retails need a clear taxonomy. Some products such as airdrops and forks are novel compared to other taxable assets,” Bandman shared, suggesting that a clearer taxation policy is crucial for supporting national industries.

Exchange platforms

With the trading landscape rapidly evolving, Bandman pointed to the US as going particularly quickly in this area of regulation partly because of the country’s extremely broad definition of a security and investment contracts.

Other regions benefit trading because their definitions are not so broad: ”In the EU, the definition of security generally excludes most cryptoassets. In the US, cryptoassets must comply with securities laws for the most part with exception of sufficiently decentralized coins like Bitcoin and Ether. Other countries have developed a bespoke framework, such as Gibraltar and Bermuda which have provided a specific framework for virtual currencies.”

Japan, however, is the nation that Bandman sees as setting the future trends for exchange regulations. He described Japan as ”leading the world” since giving specific authority to its financial market regulator to market cash or spot trading of cryptocurrencies. Now it has just authorized the first self-regulatory organization which gives trading platforms authority to police themselves.

”These are very important elements for trends in the landscape moving forward,” he concluded.

Bandom established and chaired the CFTC blockchain, virtual currency, and fintech working group from inception, serving with the CFTF from 2014-2017. He now lectures at Yale University and acts as Founder and Principal of Bandman Advisors.

His comments were made at Decentralized 2018, a blockchain conference that took place in Athens, Greece last week.

 

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Rogue Crypto Trader Joseph Kim Gets 15 Months Prison, $1.146 Million Restitution Order

Cryptocurrency trader Joseph Kim has been sentenced by the US Department of Justice to 15 months in prison, and the Commodities Futures Trading Commission (CFTC) has ordered Kim to pay USD 1.146 million of restitution after the rogue trader was found to have committed trading-related fraud from September 2017 through March 2018, which resulted in total losses of USD 1.146 million. Further, Kim has been banned from trading for the rest of his life.

In September 2017, Kim was working at a cryptocurrency trading firm based in Chicago and began sending the firm’s Bitcoins and Litecoins to his own wallet. The firm approached Kim and asked him about the missing money, and he asserted that the cryptocurrency exchange was having problems, and Kim had to transfer to other accounts for security purposes. The ruse only held up for two months and Kim was fired in November 2017 after stealing USD 601,000 from the firm.

Kim then solicited funds from clients, without notifying them that he was fired from the firm. Kim made it seem like he was trying to start his own business. Five clients invested USD 545,000, with Kim promising the money would go towards a low-risk arbitrage scheme. However, Kim made high-risk bets on directional cryptocurrency price movements, during a time when the cryptocurrency markets were crashing. Kim ultimately lost all of the money but issued false statements to customers showing profits.

The arrest and prosecution of Kim was a joint effort by the CFTC, Federal Bureau of Investigations (FBI), Department of Justice, and the Securities and Futures Commission of Hong Kong.

The Director of Enforcement at the CFTC, James McDonald, said, “Today’s Order stands as yet another in the string of cases showing the CFTC’s commitment to actively police the virtual currency markets and protect the public interest.  In addition, the criminal indictment and sentence reaffirms the CFTC’s commitment to working in parallel with our partners at the Department of Justice to root out misconduct in these markets. My thanks to US Attorney Lausch and his staff, as well as the Federal Bureau of Investigation, for their assistance in this case.”

 

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First Bitcoin-Related CFTC Enforcement Action Wins USD 2.5 Million Judgement

On 16 October 2018, a New York Federal Court ordered Gelfman Blueprint Inc., and the CEO Nicholas Gelfman, to pay USD 2.5 million restitution and fines. This is a successful end to the Commodity Future Trading Commission’s (CFTC) first Bitcoin-related anti-fraud enforcement action, an endeavor which began on 21 September 2017.

From 2014 through January 2016 Gelfman Blueprint Inc. solicited USD 600,000 of investments from at least 80 clients. This money supposedly went towards a fund for an in-house high-frequency trading algorithm named Jigsaw, which supposedly made consistent profits. However, the performance reports were fake, and payouts of profits to clients came from new investments from other clients, which makes this a classic Ponzi scheme. The period of 2014 through 2016 coincided with a Bitcoin bear market, and Gelfman Blueprint Inc. was overall unprofitable. The Ponzi scheme collapsed when a fake hack was staged to make it appear like all customer funds were stolen.

The CFTC charged Gelfman Blueprint Inc. and the CEO with fraud, misappropriation of client’s money, and issuing false accounting statements. The final judgement is USD 1.047 million of restitution to clients, and USD 2.031 million of civil monetary penalties. The CFTC warns that Gelfman Blueprint Inc and the CEO might have no money though, and therefore despite the judgement there may be no payout. Further, Gelfman is banned from participating in any future financial activity that falls under CFTC jurisdiction. Notably, there does not appear to be any criminal penalties or prison time for Gelfman, despite effectively stealing USD 600,000.

The CFTC Director of Enforcement, James McDonald, says “This case marks yet another victory for the Commission in the virtual currency enforcement arena. As this string of cases shows, the CFTC is determined to identify bad actors in these virtual currency markets and hold them accountable. I’m grateful to the members of Enforcement’s Virtual Currency Task Force for their tireless work on these matters”.

In the past, the Securities and Exchange Commission (SEC) was the primary enforcer in the crypto markets, but this landmark case shows that the CFTC is ready, willing, and able to perform similar enforcement actions. The CFTC considers Bitcoin and crypto to fall under their jurisdiction as commodities, while the SEC says most cryptos are securities and fall under their jurisdiction. Bitcoin is sufficiently decentralized not to be considered a security itself, but the Bitcoin market still sees regular enforcement action by the SEC since many Bitcoin investment products can be classified as securities.

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CFTC Discusses Possible Crackdown On Blockchain Powered Prediction Markets

Commodities Futures Trading Commission (CFTC) Commissioner Brian Quintez made a speech that was largely about blockchain smart contracts on 16 October 2018. Quintez concludes that prediction markets powered by blockchain smart contracts, such as Augur which is the #52 cryptocurrency with a market cap of USD 139 million, are under CFTC jurisdiction and can be classified as binary options.

Specifically, Quintez says “Let’s apply the general analytical framework I’ve described above to our earlier example of the “prediction market.”  In this hypothetical, after performing a facts and circumstances analysis, the CFTC has determined that the smart contracts executed on the blockchain are binary options, which are within its jurisdiction. Binary options are a type of option whose payoff is either a fixed amount or zero. For example, there could be a binary option that pays $100 if the price of gold is above $1,200 per ounce on a specified date or zero otherwise.

Moreover, the contracts in our scenario likely qualify as event contracts that are based upon the occurrence or non-occurrence of an event (as opposed to a price of a commodity).  Event contracts have a unique spot in CFTC jurisprudence because of the public policy concerns they raise. For example, event contracts based upon war, terrorism, assassination, or other similar incidents may be contrary to the public interest – in which case, the CFTC can prohibit an exchange from offering the contract”.

Indeed, the Augur prediction market has already been in the spotlight due to assassination bets being created. This opens up the possibility that any sort of bet can be created on Augur, no matter how immoral it is, especially since Augur burned the kill switch for the platform, making it decentralized and unstoppable. Clearly, the CFTC would consider immoral bets on Augur contrary to the public interest, and therefore illegal.

Quintez further explains who is responsible when smart contract powered prediction markets violate the law. “I think the appropriate question is whether these code developers could reasonably foresee, at the time they created the code, that it would likely be used by U.S. persons in a manner violative of CFTC regulations. In this particular hypothetical, the code was specifically designed to enable the precise type of activity regulated by the CFTC, and no effort was made to preclude its availability to U.S. persons. Under these facts, I think a strong case could be made that the code developers aided and abetted violations of CFTC regulations. As such, the CFTC could prosecute those individuals for wrongdoing”. This brings up the possibility that programmers who create blockchain prediction markets, such as the Augur developers, could end up in a legal battle with the United States government.

Quintez compares blockchain prediction market developers to someone who lends their keys to a bank robber. As a secondary layer of enforcement, Quintez speculates that the CFTC could sue individuals who use prediction markets, but he admits this would probably be ineffective due to the decentralized, anonymous, and global nature of blockchain prediction markets.

Apparently, LabCFTC has been created to engage with blockchain developers, to prevent blockchain platforms that violate the law from being created in the first place. However, Quintez says if engagement does not occur, then enforcement is the only option.

A final important note in Quintez’s speech is he does not consider code to be law, contrary to the thinking of many blockchain and crypto users who consider code to be a form of law. Quintez says “I have heard some say that “the code is law,” meaning that if the software code permits it, an action is allowed. I disagree with this fundamental premise. Case law, statutes, and regulations are the law. They apply to the code, just as they apply to other activities, contracts, or agreements”.

Essentially, just because something is coded into a blockchain or crypto platform, that does not make it law, and the laws of the land are definitely superior, at least in the CFTC’s opinion.

Quintez ends the speech on a somewhat positive note, saying “Smart contract applications on blockchain networks hold great promise. They have the potential to open up new markets and create efficiencies in existing ones. At the same time, they also raise novel issues of accountability that users and policymakers alike must consider”.

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US District Court Rules CFTC Has Jurisdiction over Crypto

On 26 September 2018, Judge Rya W. Zobel of the US District Court of Massachusetts ruled that the Commodities Futures Trading Commission (CFTC) has jurisdiction to regulate all cryptocurrencies as commodities. This critical ruling was issued in response to a motion by My Big Coin to dismiss a case against them by the CFTC, on the grounds that the My Big Coin cryptocurrency was not a commodity.

The US District Court used a relatively broad definition of commodities to reach this decision. It says that commodities are all goods, articles and service rights and interests for which there are contracts for future or present delivery. The court references how the fact that Bitcoin has future markets factored into this decision.

The Director of CFTC Enforcement, James McDonald, says, “This is an important ruling that confirms the authority of the CFTC to investigate and combat fraud in the virtual currency markets. This ruling, like the one in McDonnell from Judge Weinstein in the Eastern District of New York, recognizes the broad definition of commodity under the Commodity Exchange Act (CEA), and also that the CFTC has the power to prosecute fraud with respect to commodities including virtual currencies. We will continue to police these markets in close coordination with our sister agencies.”

Simultaneously, the Securities and Exchange Commission (SEC) has previously declared that almost all cryptocurrencies are securities. The SEC says that any crypto which an investor buys in expectation of future profit is a security, if profits go to a centralized organization. The SEC says that only Bitcoin and Ethereum are decentralized enough not to be considered securities.

The end result is a hostile situation where most crypto companies can be regulated by the SEC and CFTC, as both commodities and securities. The reality is Bitcoin and other cryptocurrencies are an exotic new hybrid of commodities and securities, and there are discrepancies and irregularities should states regulate cryptocurrencies like traditional financial assets. Some industry commentators feel it would be best if a new government agency were created to regulate the crypto space, with the power to override decisions by the SEC and CFTC to ensure fair treatment of crypto companies.

 

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US Spent Over $5 Million on Blockchain Espionage in 2018

The United States government has spent USD 5.7 million with blockchain analytics firms so far in 2018 and this spending is accelerating, according to a report by digital currency publication Diar. Blockchain analytics firms are paid to conduct blockchain espionage, for criminal prosecution, taxes, and to ensure crypto regulations are being followed.

Bitcoin has a public blockchain ledger, where every transaction and address can be viewed by anyone. Firms like Chainalysis, Elliptic, CipherTrace, Scorechain, Coinfirm, Blockchain Intelligence Group, Bloq, and DMG Blockchain Solutions have developed advanced software which can attach identities to Bitcoin transactions, and transactions for other cryptocurrencies as well. The biggest customers of these firms are banks and financial institutions, who use blockchain analytics to ensure no breach of know your customer (KYC) or anti-money laundering (AML) policies. Collectively, the major blockchain analytics firms listed have received USD 28.8 million of contracts.

The Internal Revenue Service (IRS) is the biggest spender relative to other US government agencies at USD 2.19 million. The IRS is in charge of taxes in the United States, and it seems it is using the most advanced blockchain tracing technology people to build cases against crypto users who are not paying taxes. This despite members of the United States congress requesting that the IRS make its crypto tax guidelines clearer, since at this point the crypto tax code issued by the IRS is so unclear, prohibitive, and arduous that most crypto users don’t know how to pay crypto taxes.

The second biggest government spender is Immigrations and Customs Enforcement (ICE) at USD 1.54 million. This is probably because the ICE seizes drugs and other illegal goods at customs, and sometimes these packages are linked to crypto payments done over the darkweb.

The Federal Bureau of Investigations (FBI) takes third place in spending with USD 1.14 million, and this is probably related to crypto activity associated with criminal suspects and crime organizations. The Drug Enforcement Agency (DEA), in fifth position with USD 0.22 million, probably uses blockchain analytics firms for the same reasons the FBI does. The FBI and DEA can actually use blockchain analytics data in court for criminal prosecution.

The Securities and Exchange Commission (SEC) is at sixth place at USD 0.18 million. The SEC is cracking down hard on initial coin offerings (ICOs) and other fraudulent crypto-related securities, so it makes sense they’re spending some money on blockchain analytics. The Commodity Futures Trading Commission (CFTC) spends USD 0.12 million, likely to ensure exchanges are maintaining regulatory compliance, since Bitcoin trading is regulated under commodity laws.

 

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CFTC Chair: Blockchain Innovation Stifled by Lack of US Regulations

At a United States Congressional hearing on Wednesday, 25 July, Christopher Giancarlo, Chairman of the Commodity Futures Trading Commission (CTFC), elaborated on the need for CFTC participation in blockchain innovation in the US.

“Because we’re falling behind”

At the “Examining the Upcoming Agenda for the CFTC” public hearing, Giancarlo explained the frustrations of the CFTC not being able to participate in Proof-of-Concept (PoC) or beta tests of new blockchain innovations, that of which can be boiled down to bureaucracy.

He says that the CFTC would love to take part and create a regulatory node in the blockchain to observe these developments. However, Giancarlo noted that the CFTC was unable to do so, owing to present laws which stifle efforts to appropriately regulate the blockchain with full understanding.

The issue is that the CFTC can’t freely exchange information between itself and a private startup as it is considered a “gift”, which is something that the agency is strictly prohibited from doing, or even a bank, even if it was by invitation.

Giancarlo also points out that paying a private company for information is redundant as it will need to go through a time-consuming appropriations process, by which time he says “this thing is already launched”.

Catching up

His words come in response to Representative Austin Scott’s question of how the CFTC Modernization Act would allow them to do their job better, a bill that was also proposed by the representative.

He noted that the Bank of England had recently managed to finalize a Distributed Ledger Technology (DLT) project through their four-year-long Project Innovate that allowed them to participate in blockchain beta tests, from which they created a new “bank-to-bank payment system” and that it is going to be “blockchain compliant”.

Giancarlo was also asked earlier by the representative to explain the future intentions of the CFTC’s hub for “engagement with the fintech innovation community” called LabCFTC. To which he responded, “LabCFTC is our front door into these new regulatory fintech developments in the marketplace, and it’s so important to us to be able to understand these innovations that are coming down the pike so fast.”

US developments

The commissioner of the CFTC Rostin Benham called cryptocurrency a “modern miracle” in early June, also believing that blockchain was a remedy to globally-recognized problems such as poverty, corruption, food and healthcare.

In July, the Chamber of Commerce created a Fintech Innovation Initiative that is urging the government to establish clearer regulations on cryptocurrencies and related activities. Furthermore, it sent a report to US financial regulators also relaying the message that the US could fall behind the rest of the world.

It appears as though the cogs are finally turning in the US, though the nation will have to certainly set a high pace should it wish to be in league with countries such as South Korea, Malta, or the United Kingdom.

 

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Ethereum Could Get Major Lift from Plasma, Sharding Developments, SEC Boost

Ethereum has currently created an environment for some positive movement due to current developments in hand and positive SEC rulings over the past few days, according to NewsBTC. Although the price of Ether continues to reflect the current market, there are some positive developments such as its Plasma updates and sharding solutions.

Sharding, also known as horizontal partitioning is a design principle whereby rows of a database table are held separately, rather than splitting by columns (as for normalization). Each partition forms part of a shard, which may, in turn, be located on a separate database server or physical location, explains Stackoverflow.

Plasma itself is a collection of standard smart contracts used to create a tree of side-chains aptly called Plasma chains. This collection of smart contracts includes a multitude of key innovations that together make up a powerful tool in the battle towards scaling Ethereum’s capacity, explains Coincentral.

If Plasma is successful, it will successfully help Ethereum scale to a whole new level, and there has been some talk regarding Plasma Debit, which has the potential of introducing payment channels to Plasma Cash.

Ethereum can also gain a lift up after US Commodity Futures Trading Commission (CFTC) commissioner Rostin Beham’s recent unexpected remarks that cryptocurrency is a “technological revolution” that will one day be a part of every national economy, tagging blockchain as life “transforming”.

Add to that the statement of director of division of corporation finance at SEC, William Hinman, which lifted market hopes considerably:

“And putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions. And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value.”

Such views from the SEC are empowering for Ethereum, Bitcoin and the blockchain, clearly adding much-needed and long-awaited legitimacy to crypto space, and along with new projects in hand, are certainly a step in the right direction for Ethereum investors.

 

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