Bitcoin Recovers After Correction Caused by Increasing Fear of Regulatory Crackdown: Week in Review Jan 22
In the past week, we saw the price of bitcoin drop from $14,380 to a low of $9,446 after increasing fear of a harsher-than-expected regulatory crackdown on cryptocurrencies is being hinted at by French and German officials who intend to address the matter at the upcoming G20 meeting.
Unsurprisingly, many mass media outlets and vocal bitcoin critics highlighted this correction as the “bitcoin bubble burst” that they have been predicting all along. However, by the end of the week, bitcoin was trading back above the $12,000 mark, which is a testament to bitcoin’s ability to withstand political pressure from regulators and shows that there is enough investor confidence for a rally to new highs in 2018.
How an EU-wide or even global regulatory framework for decentralized cryptocurrencies will look like remains to be seen. An outright ban on digital currencies seems unlikely due to the censorship-resistant nature of decentralized cryptocurrencies. Furthermore, countries like Japan have legalized bitcoin as a payment system and Belarus has recently announced that it will not tax any crypto-related activity within its borders for the next five years. This suggests that even if European political leaders decide on a bitcoin-unfriendly regulatory framework for digital currencies, the most likely results of this will be regulatory arbitrage of the most influential bitcoin businesses.
As it is almost always the case, when bitcoin corrects, the altcoin markets corrects even more. In the past seven days, leading altcoins such as ether (ETH), ripple (XRP) and litecoin (LTC) corrected by 16 percent, 21 percent and 18 percent respectively, while the majority of the top ten altcoins have also corrected by 15 to 25 percent.
This week’s contributions have been provided by Akshay Makadiya, Alex Lielacher, Andrew Weilbacher, Nuno Menezes, Ogwu Osaemezu Emmanuel, and Rahul Nambiampurath.
Released on January 12, 2018, the report titled, “Bitcoin Laundering: An Analysis of Illicit Flows into Digital Currency Services” was prepared by Yaya J. Fanusie and Tom Robinson.
The study found that the percentage of bitcoin that was moved around in an effort to obfuscate its illegal origins was tiny. “The amount of observed Bitcoin laundering was small (less than one percent of all transactions entering conversion services).”
However, the report did observe steady growth in the number of illicit entries from 2013 to 2016 with dark web marketplaces being the major sources of these illicit funds.
Telegram, an encrypted messaging app, is launching an ICO that is expected to be one of the biggest ever. The company’s founder Pavel Durov wants to develop a payment platform using a multi-blockchain architecture that aims to compete with Visa Inc. and Mastercard Inc.
The company is seeking $850 million in a private sale of tokens to large investors this month and $1.15 billion in a subsequent public ICO in March. The information was disclosed by people who held negotiations with the company and asked not to be identified. The messaging service, used as a hub by the cryptocurrency market, previously sought to raise a total $1.2 billion, but now the company is aiming to go for a bigger score.
The Israeli authorities have issued a notice to organizers and investors stating its intentions of taxing the highly lucrative ICO ecosystem. In the circular, tax authorities split ICOs into two broad categories; service transactions and sales transactions.
The Israeli Tax Authority Director Moshe Ashe explained that this latest development is in a bid to increase transparency in the system. In his words: “The Tax Authority is monitoring the technological developments and is working to provide an answer regarding the tax implications of virtual currency transactions and the issuance of digital tokens, thereby increasing the certainty and tax transparency of those operating in the field.”
As contained in the document, projects that raise over 15 million Israeli new shekels (INS) must follow the bookkeeping guidelines in-line with existing laws. This initiative goes a long way in ensuring that ICO organizers remain transparent and trustworthy.
The U.S. securities industry regulator, Securities and Exchange Commission (SEC), have denied the proposals of two wall street trade groups to create crypto-based exchange-traded funds (ETFs).
In the letter, the SEC states that it is important to measure risk involved in such investments. It also asks the two groups to ensure such operations are in accordance with the law.
The SEC wrote, “[We stand] ready to engage in dialogue with sponsors regarding the potential development of these funds. We believe, however, that there are a number of significant investor protection issues that need to be examined before sponsors begin offering these funds to retail investors.”
The central questions in the letter are attributed to rising concerns such as volatility, liquidity, custody, and potential manipulation. The letter questions how these ETFs would deal if a digital asset forks and how these ETFs would address the possible manipulation in a cryptocurrency market.
It has been announced that following their Series B round of fundraising, Ledger has managed to earn an additional $75 million. This comes after they raised $7 million in 2017 during their initial round, with the hype surrounding the world of crypto of late having no doubt increased the confidence of investors who saw this as an ideal opportunity to get involved with what is now the leading provider of hardware crypto wallets.
Ledger wallets are a French-based startup, and they have become massively popular for their hardware wallets. The idea behind this product is that it keeps your valuable coins safe and secure from potential hackers. You essentially transfer your coins to this physical wallet and then store it somewhere safe. It is not connected to any network so it cannot be hacked.
Some significant names invested in this latest round of fundraising, with the likes of the Digital Currency Group, GDTRE, CapHorn Invest, Korelya Capital, Cathay Innovation and FirstMark Capital all getting involved.
According to Le Maire, bitcoin and other cryptocurrencies have resulted in an alarming amount use among terrorists and tax evaders alike.
Le Maire has also publicly criticized the notion of virtual currencies and tokens several times in the past, including statements to the effect: “I don’t like it. It can hide activities such as drug trafficking and terrorism.”
Le Maire has ordered the head of the country’s central bank to come up with a new regulatory framework surrounding cryptocurrencies. The finance minister also stressed that there might have been possible financial manipulation and price speculation in the market.
It is common knowledge that the President of France, Emmanuel Macron, holds similar views regarding the current state of the cryptocurrency ecosystem and likely supports the minister’s action.