Purported Former Cryptopia Developer Claims Hack Was an Inside Job

A purported former developer at the hacked cryptocurrency exchange Cryptopia has recently claimed through a blog post the security breach was an inside job.

Cryptopia Operates as Hobby Project Until 2017

According to the author of the post, they and fellow co-founder, Adam, began working on a then-fledgling project called Cryptopia during January 2014.

Following the launch of the exchange in December 2014, the pair would work Cryptopia during their free time. During 2015 the author resigned his full-time job to devote himself to the project, with Adam also resigning from his position as a developer with a company called Intranel shortly thereafter.

The author states that Intranel did not want to lose Adam, and offered the pair a room in their office to rent which was paid for “by Adam doing sprint code work for Intranel.” The author also notes that Intranel showed an interest in Cryptopia “very early on,” however, the pair did not see any need for the company to get involved at that time.

However, by early 2017, a year in which most cryptocurrencies reached a new all-time high, the author states that Cryptopia began to experience “exponential growth at a scary pace,” with the pair subsequently starting to “take Intranel’s offers more seriously” as neither of the Adam nor the author identified themselves as “business men.”

The author states that Intranel made an offer for 20% of the company in exchange for handling “all of the business management and development, things like helping hiring and managing staff, paying tax, lobbying for regulator guidance, all the ‘boring business stuff’.”

Intranel Allegedly Muscles Control Over Cryptopia

The author asserts that Intranel “immediately set to playing games of divide and conquer,” and “put their staff in key managerial positions to allow themselves degrees of autonomy without seeking shareholder or director consent.”

After becoming reliant on the work and staff provided by Intranel, the author states that the company demanded a further 5% of Cryptopia’s shares, threatening to “leave [the pair] high and dry with [their] arrangements.”

The debacle led Adam to resign, with Intranel suggesting that the author “take a holiday” to avoid getting burned out. While away, Intranel ceased payments to the author and began to take further action without shareholder or director consent, including issuing “themselves a loan for approximately $300,000 from the company to them personally for ‘startup costs’.”

The author also alleges that Intranel attempted to sell the company out from under them on three separate occasions.

Author Alleges Hack Comprised an Inside Job

The author states that after Intranel was “forcibly” removed during November 2018, it became apparent that the Cryptopia was on the verge of bankruptcy, stating: “no one had any idea the dire situation they had gotten the company into, or that it would not have been able to afford their own next invoice.”

The author concludes by accusing Intranel of orchestrating the hack that devasted the Cryptopia, stating:

I believe the Hack was orchestrated to bury everything they have done, and was planned to happen before we removed them so that it could tidily explain the state they had gotten the company into. And then rushed after their plan was interrupted when they were forcibly removed from the company.

According to a report by Grant Thornton, Cryptopia’s assigned liquidator, the exchange owed a total of $4.22 million to its creditors

Billionaire Investor Tim Draper Calls Libra a Bridge to Bitcoin Adoption

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Billionaire Investor Tim Draper Calls Libra a Bridge to Bitcoin Adoption

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Billionaire investor Tim Draper revealed he believes that Facebook’s cryptocurrency libra will serve as a bridge for greater bitcoin adoption. 

Building to Bitcoin

Draper appeared on CNBC’s “Squawk Alley” program to discuss the impact of Facebook on cryptocurrency. While others have positioned libra as a potential bitcoin killer, the American investor thinks Facebook’s digital currency will serve as an entry point into crypto for mainstream audiences. 

 

 

He doubled-down on his opinion that bitcoin is the primary driver for innovation, despite the rise of altcoins and large platform tokens like libra. 

He said, 

 

“I think all these other cryptos are bridges to where we have a Bitcoin environment.”

 

Despite the global attention generated by libra, bitcoin has consolidated market share throughout 2019. According to a recent report published by CoinGecko, bitcoin was the top performing high market cap cryptocurrency in Q2 2019 and BTC market dominance climbed to a relative high of 65%.

In addition, the top five cryptos now control 86% of the overall market capitalization, giving the appearance that investors are concentrating on established projects at the top. 

Heavy-Handed Regulation 

Draper took issue with the way U.S. regulators have treated both bitcoin and libra. He explained that heavy-handed interventions and too much pressure would stifle innovation for digital currencies and blockchain. In the case of Facebook, lawmakers are falling over themselves to criticize libra well ahead of its launch. 

He told the Squawk Alley crew, 

 

“We’re putting regulation before the innovation — Facebook’s just announced Libra; they haven’t even been able to ship it yet, and the regulators are all over them.”

 

Draper has also been critical of the Government of India for its purported connection with a bill that would make using cryptocurrencies an offense punishable with up to ten years in prison. The American investor created a firestorm on Twitter after calling the Modi government “pathetic and corrupt.”

 

 

While India has yet to institute a ban on crypto, an unofficial drafted bill surfaced on July 15 that would seek to prohibit the use of bitcoin and other digital currencies. 

EnCirca Accepting Pre-Registrations for Ethereum’s .ETH Domain Names

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EnCirca Accepting Pre-Registrations for Ethereum’s .ETH Domain Names

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EnCirca, Inc. (“EnCirca”) announced on Monday (July 22) that it is the first generic top-level domain (gTLD) registrar accredited by the Internet Corporation for Assigned Names and Numbers (ICANN)—a nonprofit organization “responsible for coordinating the maintenance and procedures of several databases related to the namespaces and numerical spaces of the Internet”—to accept applications for .ETH domain names.

In a press release shared with CryptoGlobe, EnCirca said that Ethereum’s .ETH “was created to map human-readable domains names to blockchain wallets, facilitating ease of use.” 

Tom Barrett, President of EnCirca, stated:

Billions of internet users will soon have blockchain wallets for sending and receiving crypto-currencies. In response, EnCirca has made it easy for brand owners to protect their trademarks on the blockchain.

Since blockchain domain names “are not regulated like .COM or .ORG domain names,” the “traditional trademark protection mechanisms to prevent cyber-squatting of brand names are nonexistent,” and that’s why EnCrica is advising brand owners to “defensively protect their trademarks in the .ETH top-level domain as soon as possible.”

EnCirca also says that the Ethereum Naming Service (ENS) has two types of application processes (depending on the length of the domain name that you wnt):

  • Short Character .ETH Domain Names (such as Apple.ETH), which are three to six characters long. Naturally, these are expected to be very popular, and so to “ensure that these short domain names are allocated to those who have already used the same string in a pre-existing domain like .COM or .US,” Ethereum will “award registrations to the applicant demonstrating the longest continuous use of the same name in an existing domain name extension, such as .COM, .US, .ORG etc.” You can pre-register until August 2. The price is based on the length of the domain name. Also, it should be pointed out that pre-registration does not “guarantee the name.” In the event that a name is pre-registered by more than one person/company, “the name will go into an auction phase.”
  • Long Character .ETH Domain Names (such as Microsoft.ETH), which are seven characters or longer.  These are “available now on a first-come, first-served basis,” and in fact, have been publicly available since May 2017 (with almost 300,000 names already registered). Note that “some names may be reserved or premium.”

You can apply to EnCirca for both short and long character .ETH domain names.

The timeline for the .ETH domain name launch is:

  • May 19: “Pre-registrations began”
  • August 2: “Last day for submissions”
  • October 2: “Short name auction bid period ends”
  • November 2: “Short name auction reveal period ends”

Featured Image Credit: Photo via Pexels.com

BREAKING: Bakkt ‘Kicks Off User Acceptance Testing’

On Monday (July 22), Bakkt, a subsidiary of Intercontinental Exchange (ICE), announced that it had started user acceptance testing (UAT) for its Bitcoin futures products.

On 3 August 2018, Intercontinental Exchange (ICE), a leading operator of global exchanges, clearing houses, data and listings services, announced that it planned to form a new subsidiary named Bakkt that would be creating “an integrated platform that enables consumers and institutions to buy, sell, store and spend digital assets on a seamless global network.” 

Mopre specifically, ICE said that “as an initial component of the Bakkt offering,” ICE’s “U.S.-based futures exchange and clearing house plan to launch a 1-day physically delivered Bitcoin contract along with physical warehousing in November 2018, subject to CFTC review and approval.” 

Until the Bakkt Institutional Digital Asset Summit on July 18, what we knew (according to a blog post by Bakkt COO Adam White) was that on July 22, Bakkt planned to start user acceptance testing (UAT) for its Bitcoin futures products. 

We also knew from Bakkt’s Frequently Asked Questions (FAQ) guide that:

The first two contracts to be listed by ICE Futures U.S. are “Bakkt Bitcoin (USD) Daily Futures” and “Bitcoin (USD) Monthly Futures”.

In order to provide “regulated custody in the Bakkt Warehouse, Bakkt has filed with the New York State Department of Financial Services (NYDFS) for approval to form a limited-purpose trust company that would serve as a qualified custodian of bitcoin under applicable law.”

Bakkt expected to launch its platform in H2 2019 following the completion of UAT and “receipt of regulatory approval from NYDFS.”

Then, on July 20, Sam Doctor, a Managing Director and Quantamental Strategist at Independent research boutique Fundstrat Global Advisors, released on Friday (July 19) a report on Bakkt Institutional Digital Asset Summit (July 18); one of the many interesting takeaways was that the full launch of the Bakkt platform is expected is to take place later this quarter. 

In a tweet posted that day, he presented one slide from his presentation that showed the key takeaways of Fundstrat’s “Bakkt Institutional Digital Asset Summit takeaways” report, the most interesting of which was that the full launch of the Bakkt platform is expected “late in the current quarter.”

At 19:30 UTC on July 22, Bakkt’s official Twitter account sent out the following tweet:

Featured Image Credit: Photo via Pexels.com

 

FINRA Will Continue to Monitor the Crypto Activities of Broker-Dealers

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FINRA Will Continue to Monitor the Crypto Activities of Broker-Dealers

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A U.S. regulatory initiative to monitor the cryptocurrency-related activities of the country’s brokerages that was due to end this month has been extended for another year.

Last July, the Financial Industry Regulatory Authority (FINRA), a self-regulatory body for U.S. broker-dealers, issued Regulatory Notice 18-20 requesting its members to inform their “regulatory co-ordinators” if they or any affiliates or associated persons engaged, or intended to engage in activities related to digital assets.

The regulator asked firms to continue reporting such activities until July 31, 2019, but late last week FINRA issued Regulatory Notice 19-24 requesting members to continue to report such activities until July 31, 2020 – extending the initiative for another year.

Activities That Must be Reported

The types of activity of interest to FINRA include, but are not limited to:

  • Purchases, sales or executions of transactions in digital assets
  • Purchases, sales or executions of transactions in a pooled fund investing in digital assets
  • Creation of, management of, or provision of advisory services for, a pooled fund related to digital assets
  • Purchases, sales or executions of transactions in derivatives such as futures and options tied to digital assets
  • Participation in an initial or secondary offering of digital assets (ICO, pre-ICO etc)
  • Creation or management of a platform for the secondary trading of digital assets
  • Custody or similar arrangement of digital assets
  • Acceptance of cryptocurrencies such as bitcoin from customers
  • Cryptocurrency mining
  • Recommend, solicit or accept orders in cryptocurrencies and other virtual coins and tokens
  • Display indications of interest or quotations in cryptocurrencies and other virtual coins and tokens
  • Provide or facilitate clearance and settlement services for cryptocurrencies and other virtual coins and tokens
  • Recording cryptocurrencies and other virtual coins and tokens using distributed ledger technology or any other use of blockchain technology

Initiative Extended

In its initial Regulatory Notice 18-20, FINRA noted that the market for digital assets had grown significantly and was becoming increasingly attractive to retail customers. It added that investor protection concerns exist, and therefore it had a keen interest in the extent of member involvement in cryptoassets.

Firms that engage or begin to engage in such activities are reminded to consider all applicable federal and state laws, rules and regulations, including FINRA and SEC rules and regulations.

On July 8, the U.S. Securities and Exchange Commission issued a joint statement with FINRA regarding the digital asset activities of broker-dealers. It outlined that such firms must ensure that their crypto activities comply with its Customer Protection Rule that protects investors from losses and delays in accessing their funds should the firm fail.

The statement said:

The manner in which digital asset securities are issued, held, and transferred may create greater risk that a broker-dealer maintaining custody of them could be victimized by fraud or theft. Consequently, a broker-dealer must consider how it can hold in possession or control digital asset securities [in compliance with the Customer Protection Rule].

Binance Expands YubiKey Support for Two-Factor Authentication (2FA)

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Binance announced on Monday (July 22) expanded support for two-factor authentication (2FA) via Yubico’s “Yubikey” hardware-based security keys.

A YubiKey security key can be purchased from Yubico for as little as $20 (in the case of their “Security Key by Yubico” product):

Yubico Security Key.jpg

A few days after Binance announced that it had suffered a major security breach on May, Binance CEO Changpeng Zhao (aka “CZ”) said via a “Security Incident Update” published on Binance’s blog that the Binance team was “making significant changes to the API, 2FA, and withdrawal validation areas”, and as a result, it would be improving Binance’s two-factor authentication (2FA) by implementing  support for hardware-based security keys such as Yubico’s YubiKey devices, and that in fact, Binance would be giving away “1,000 YubiKeys as soon as that feature is implemented.”

Then, on June 27, CZ sent out a tweet that told Binance users that YubiKey support had been implemented and it was in the beta testing stage. He also explained that Binance was at that time only using a YubiKey device (for those customers that had set one up for their accounts) for verifying withdrawals:

On the same day, a Binance support article explained how users could use a YubiKey device for 2FA.

The next day, a Binance blog post announced that Binance had added support for two-factor authentication (2FA) through hardware security keys,” and that this was ” in addition to the SMS and Google Authenticator options supported on the website and apps.”

Furthermore, this post explained that the “Binance website, both on desktop/laptop and mobile, now supports the FIDO2 open authentication standard,” which means that “2FA devices that support this standard, like YubiKey, Trezor, and others, can be used as security keys” for Binance accounts. It also said that Binance’s mobile apps would be adding this feature in the future.

Earlier today, Binance sent out a tweet to notify users that they can now use 2FA via security keys for “Withdraw & API”, “Log In”, and “Password Reset”); Binance also, once again, recommended using a YubiKey device as a security key:

 

Featured Image Courtesy of Binance. YubiKey Device Image Courtesy of Yubico.

Adding Fiat On-ramps and Off-ramps to Your Cryptocurrency Platform

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Developing the technology to deal with innovations such as cryptocurrency is unlike anything we’ve seen before. It’s a task-heavy and labour intensive process to engineer the infrastructure to cope with blockchain-based currencies.

If you are involved in a business featuring one aspect of cryptocurrency buying, selling, or storing, it might be appealing to offer more services. But it might not be possible right now because of how difficult it can be to develop the necessary platforms to expand your services.

It turns out that you don’t actually need to engineer the systems yourself, and you can offer more features without spending the time, energy, and capital building them.

With Coindirect Business, you can integrate your services with a simple plug-and-play system, allowing you to provide your customers with more options and more support with none of the headaches involved.

Why do I want to add more cryptocurrency features?

You might wonder why you want people to sell cryptocurrency when offering the “buy Bitcoin” service is much more popular.

You provide better support

Tim might want to buy Bitcoin right now, but he’s also interested in a company where he can sell it just as easily when it hits a certain value. If we come down to it, Tim really just wants a place where he can deal with all of his cryptocurrency-related transactions without any real hassle. What he wants is to buy, store, send, and sell his Bitcoin in one tab.

And you can offer it to him.

With no engineering needed.

You reach new customers

When you expand the services you offer, you also expand your customer base. Simple on and off-ramps can make a world of difference to your customer reach. Literally.

With different options available, your patronage will grow on a global scale. The benefit of internet-based currencies means the financial world is at your customer’s fingertips. With the right services, it can be your platform they stay on.

Simply put, “the more, the merrier” is not just a fun saying. Offering more services to your platform will bring merriment to your customers, and customers to your business.

Add cryptocurrency support to your platform

The main features for which HOLDers, casual traders, and investors are looking are those which allow them to buy, sell, and keep their cryptocurrency.

Let your customers buy cryptocurrency safely

Adding an on-ramp to your platform allows your customers to purchase cryptocurrencies using a number of different payment methods.

Integrating with Coindirect Business, you can accept fiat and offer your customers to buy cryptocurrency using:

  1. Credit cards,
  2. Bank transfers, and
  3. Mobile money.

Let your customer sell cryptocurrency

If you’ve kept an eye on Bitcoin over the past few months, you’ll know that it’s value has shot up substantially. As it stands, some traders are holding to see how much higher it will go.

Others are looking to see how they can sell the tidy profits they made on the amount they bought when it was at a $3500 low.

Your customers are looking to sell Bitcoin. They gain a neat sum of cash for their well-timed investment and you earn yourself some happy customers. It’s a win-win situation.

Let your customer store cryptocurrency

Finding the right Bitcoin wallet can be a nightmarish task for an individual who is not crypto-savvy. Odds are, most users who are not traders by profession would much rather keep their Bitcoin at the same place they had bought it. If you already offer buy-and-sell features, providing wallet services seems the next step to securing more traffic.

QuickBit Confirms Security Breach Exposed Details of Over 300,000 Customers

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QuickBit Confirms Security Breach Exposed Details of Over 300,000 Customers

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QuickBit, a cryptocurrency exchange listed in Sweden, confirmed on Monday reports of a security breach that left many of its customer records exposed.

Reporting for Comparitech, tech writer Paul Bischoff claimed that a database containing more than 300,000 customer records was left open so “anyone online could view its contents”.

QuickBit sells cryptocurrency to customers who are able to pay for purchases with credit cards. Although some of these details could be seen, the company insisted in an update on its blog that full card information was not exposed.

Third-Party System Delivery

The security breach occurred during the delivery of a new third-party supplied system for customer screening. QuickBit said in a press release:

In connection with the delivery of this system, it has been on a server that has been visible outside QuickBit’s firewall for a few days, and thus accessible to the person who has the right tools.

The database included information about customers’ names, addresses, email details and truncated credit card information [first six and last four digits] for “approximately 2% of Quickbit’s customers – around 300,000 people, according to Bischoff’s report.

No Harm to Company or Customers

QuickBit stressed the following details had not been included in the security breach:

  • No passwords or social security numbers have been exposed
  • No complete account or credit card information has been exposed
  • No cryptocurrency or keys for this have been exposed
  • No financial transactions have been affected

It added:

QuickBit’s technicians have immediately taken steps to ensure that all servers are protected behind firewalls, and prevent the possibility of similar incidents. We want to emphasize that the data that has been accessed cannot be used to harm either the company or its customers.

How it Happened

Bischoff, along with security researcher Bob Diachenko, discovered that a MongoDB database – a specially developed system for handling documentation –  had been left exposed on July 2 and immediately notified QuickBit by email. The database was pulled offline within 24 hours of this notification.

While QuickBit insisted its customers were safe and that their full credit card numbers had not been exposed, fraudsters can use some of the personal information that was available to conduct phishing attacks and could make hacking attempts easier.

QuickBit said the supplier of the third-party system was involved in assessing data security and that it would publish a public version of the incident report on its website shortly.
 

The Week: Facebook Faces Congress and Roubini Seeks Revenge

Over the past week, Facebook received a grilling in a congressional hearing over its Libra proposal, the CFTC began investigating BitMex over unregistered activity among its VPN-wielding US user base (prompted by Professor Roubini’s crusade against the platform, perhaps?) and a study found that 94% of transaction data on the BSV blockchain comes from {suppresses snigger} a weather app.

Facebook questioned on ability to deplatform users

Regulatory scrutiny of Facebook’s proposed stablecoin, Libra, began in earnest as its project lead David Marcus faced the House Financial Services Committee in Washington. Among the topics of interest to the committee was whether Facebook would retain the power to censor user transactions in the same way it can ban users from its social media platform. Marcus remained tight-lipped on the matter, answering “I don’t know yet.

Ethereum considering Bitcoin Cash as scalability ‘stopgap’

It’s safe to say that Vitalik Buterin isn’t widely popular among the Bitcoin community, a proportion of whom blame him for the glut of cheap ERC-20 tokens flooding the market and tarnishing the integrity of the space. The news that Vitalik is considering using the BCH blockchain, equally a source of contempt for hardcore bitcoiners, as a data layer to assist with the transition towards Ethereum 2.0 will likely do little to reverse such sentiments.

Thieves attempt to storm the Bitcoin Embassy

Virtual crimes are commonplace in crypto, exemplified by notable hacks at major exchanges. Physical attacks, on the other hand, aren’t so common. The reason for this can be better understood following a raid on The Bitcoin Exchange in Birmingham, where the robbers left empty handed after discovering there was nothing there to steal.

The long take

What now for Coinbase’s retail strategy?

In September 2018, Coinbase proudly announced the launch of a new product aiming to capture evident retail interest in crypto. Branded as Coinbase Bundle, the product gave investors the opportunity to purchase a market-weighted basket of the top cryptoassets, which included Bitcoin, Ethereum, Bitcoin Cash, Litecoin and Ethereum Classic. The set-and-forget nature of the offering seemed perfectly suited for a large market segment unfamiliar with the ins and outs of crypto and perhaps feeling a sense of overwhelm at the wide selection of assets they see on competitor sits such as Binance. In a new and untested asset class, diversification seemed like a sensible investment strategy. The launch was accompanied with marketing materials showing the purchase of such a basket would have yielded 160%+ returns over the course of that year.

More than nine months later and it’s of little surprise to learn that Coinbase has discontinued the product. In what’s been a dismal period for alts – the majors included – the market has shown little diversity on which to build a healthy and resilient portfolio. In fact, a $100 investment into the bundle a year ago would have dwindled to a paltry $20. Maximalists would rejoice in the unarguable statement that ‘you’d have been much better just buying Bitcoin’.

Coinbase, at least in recent years, has never been about ‘just buying Bitcoin’. Positioned as a trustworthy and unintimidating venue for the retail investor, the platform has put a lot of effort into distinguishing itself from cut-throat trading venues such as BitMex and shady bucket shops like the Cryptopias of the world. As the presentable face of crypto, it wants to be able to offer retail customers access to a range of attractive investment opportunities. So far, these have not been forthcoming. Ethereum, despite a recent recovery, is still down heavily from its ICO-hazed all-time high, Bitcoin Cash can safely be labelled the loser from the contentious 2017 fork, Ethereum Classic somehow still exists despite an embarrassing 51% attack and Litecoin is currently feasting on the ‘halvening’ narrative despite the real risk of miner shock. Furthermore, recent additions to the platform such as XRP, XLM, EOS and ZRX have failed to ignite, dropping precariously since their respective listings. The surprise addition of LINK has potentially broken the trend, however there is still little evidence mainstream investors are lining up to use the platform.

The real question is whether the crypto space is mature enough for a multi-coin offering to exist on a newcomer-focused platform like Coinbase. The venue has profited massively as a fiat on-ramp for millions of customers, but while its regulation-dodging competitor Binance continues to attract more than $1.5 billion in volume daily, offering products its customers really want such as IEOs, an exotic selection of coins and now (gulp) margin trading, why would anyone shop at Coinbase for their altcoins?

The future of Coinbase holds two realistic possibilities; one is that the alt space regains strength and casual retail investors are (re)attracted to the space, where they then see Coinbase as a safe haven for their long-term crypto investments. The other, while ‘heartbroken’ Brian Armstrong would be loath to accept it, is that that they’re forced to fully embrace their position as a place where people can easily onboard to the asset that has outperformed most traditional asset classes in recent years. To paraphrase a popular twitter meme: Bitcoin doesn’t need a bundle.

Tweets of the week

The Crypto Fam spreads some much-needed hopium on the prospect of another altseason:

Sean Ryan Adams provides an irreverent take on the Facebook hearing:

Lil Bubble quips on the forthcoming miner emission halvening event:

Don’t miss

For $15K, He’ll Fake Your Exchange Volume – You’ll Get on CoinMarketCap

CoinDesk shares the story of a Moscow State University student who’s bringing in some extra pocket money by manipulating crypto markets on behalf of his clients, which he concedes ‘isn’t entirely ethical’.

Meltem Demirors Complete Congressional Testimony on Libra & Bitcoin

Ms Demirors helps congress understand precisely why Libra is not a cryptocurrency.

Paradigm Shifts

Will Bitcoin benefit from macroeconomic forces? Investing legend Ray Dalio explains why generational shifts may drive smart money toward more stable stores of value.

Iran Moves to Authorize Cryptocurrency Mining With New Pricing Scheme

According to a Financial Tribune report that was published on July 21, Iran proposed a new pricing scheme for cryptocurrency miners, which will be based on comparable tariffs in place for electricity imports.

The announcement was made on Sunday by Homayoon Ha’eri, Iran’s Energy Ministry deputy for power and electricity, who noted that the scheme is still awaiting final approval from the Iranian cabinet. Ha’eri did not reveal the price scheme, however, indicated that market factors including energy prices would drive pricing.

Iran Expected to Embrace Cryptocurrency Mining

On July 10, the governor of the Central Bank of Iran (CBI), Abdol Nasser Hemmati announced the Iranian administration is preparing to authorize cryptocurrency mining, despite the lack of an existing regulatory apparatus legitimizing the activity in Iranian law.

Hemmati indicated that the government had approved aspects of an executive law that would permit cryptocurrency mining, following an increase in the prevalence of mining owing to cheap electricity prices.

The CBI governor specified that the pricing scheme for electricity provided to miners “should be done based on the price of electricity for export,” adding: “what’s more important is that these mined currencies should be fed back to the national economic cycle.”

Iran currently exports electricity to neighboring countries for roughly between $0.07 and $0.10 per kilowatt-hour, however, industrial and agricultural operations receive subsidized electricity at approximately $0.05 per kilowatt-hour.

On July 9, reports indicated that Iran’s Energy Ministry had proposed a rate of $0.07 for each kilowatt-hour consumed by cryptocurrency miners.

Cheap Electricity Attracts Cryptocurrency Mining Operations to Iran

Cheap electricity has reportedly attracted miners to Iran since at least December 2018, with various news outlets highlighting the increasing presence of Chinese miners in the country. The story quoted a statement from a Chengdu-based start-up that it had deployed 2,000 mining units to Iran.

On July 6, Iran’s Minister for Communications and Information Technology, Mohammad Javad Azari Jahromi, relayed rumors of private Chinese mining operations having a presence in Iran, stating

There is no evidence of the activity the Chinese in Iran although I have heard it unofficially.

During June, Iran’s power generation and distribution company, Tavanir, reported that the country’s electricity consumption between May 22 and June 21 had increased by 7% compared to the same period during the previous year. A spokesperson for Iran’s Ministry of Energy attributed the bulk of the “unusual increase” to “the activity of bitcoin miners.”

The spokesperson, Mostafa Rajabi Mashhadi, estimated that the power required to mine a single bitcoin could supply two dozen residential units for an entire year. Mr. Mashadi warned that authorities would crackdown on the unsanctioned usage of electricity for cryptocurrency mining, stating that “bitcoin miners will be identified and their electricity will be cut.”

In late June, Iranian state television reported that two mining farms located in abandoned factories had been shut down, resulting in the seizure of approximately 1,000 mining rigs.