Blockchain Data Developer Spring Labs’ Research Program Gains 16 Startup Members

United States-based blockchain startup Spring Labs announced sixteen fintech companies had joined its partner program prior to the release of its Spring Protocol in a press release Jan. 17.

Spring Labs, which last year raised $15 million in funding, aims to release anti-fraud technology in the form of private P2P data sharing technology, powered by blockchain.

At the same time, it has convened the Spring Founding Industry Partners (SFIP) Program, a research effort comprised of partners aiming to further reduce data fraud and boost security prior to the Protocol’s public release.

Now, a further sixteen small businesses and consumer fintech lenders have signed up to the program.

“As an ever-increasing amount of financial transactions move online, new types of mission-critical fraud and ID verification solutions based on information sharing must be developed,” Noah Breslow, CEO of one of the new participants, OnDeck Capital, commented in the press release:

“We believe the team at Spring Labs has the right background to galvanize industry leaders around the creation of a new and innovative network.”

Spring courted press attention in October when it revealed it had hired Gary Cohn, the former chief economic advisor to U.S. President Donald Trump, to work on its board of advisors.

The role P2P blockchain technology could play in data security has become a preoccupation of various players recently, with projects such as CoinBene’s ‘Internet of People’ also underway.

Blockchain Featured in Big Four Firm Deloitte’s Annual Tech Trends Report

Blockchain is featured as a disrupting technology in the Tech Trends 2019 report published by Big Four audit and consulting firm Deloitte on Jan. 16.

According to one article in the report, “[a]dvanced networking is the unsung hero of our digital future,” and blockchain is cited as a part of it. The report — which mentions blockchain 25 times — notes that blockchain is among the technologies the importance of which is growing rapidly and still on its path towards mass adoption.

The report also cites a International Data Corporation’s (IDC) projection from last year that states worldwide spending on blockchain solutions will reach $9.7 billion in 2021. Another IDC’s prediction sees the spending hitting $11.7 billion in 2022.

The annual report also notes that the fact that blockchain is “capturing both mindshare and investment is remarkable considering that a few years ago the word blockchain was known only through its relationship to cryptocurrencies.” The authors explain their take on the nature and implications of blockchain:

“Today, blockchain is to trust what the web was to communication: a profoundly disruptive technology that transforms not only business but the way humans transact and engage.”

Deloitte’s report forecasts ares in which blockchain is likely to develop this coming year, saying “we will likely see breakthroughs in gateways, integration layers and common standards in the next few years.”  For cryptocurrency applications, the researchers expect proof-of-stake (PoS) algorithms — a less computing intensive way to verify transaction that does not rely on mining — to address scalability and transaction cost problems.

As Cointelegraph reported in October last year, Deloitte has outlined five basic areas in which blockchain technology needs to develop in order to achieve widespread adoption.

The five obstacles cited to the adoption of the technology are the possibility of time-consuming operations, lack of standardization, high costs and complexity blockchain applications, regulatory uncertainty, as well as the absence of collaboration between blockchain-related firms.

Deloitte’s point of view is apparently in contrast with the ideas of major financial consulting company McKinsey & Company which — as Cointelegraph recently reported — believes that there is little evidence of practical use cases for blockchain.

Malaysia Develops Harsh Regulation Alongside With Positives Attitudes Toward Crypto

Cryptocurrency exchanges and blockchain-based companies in Malaysia face some testing times following regulatory changes in the country. As of Tuesday, Jan. 15, new regulations governing cryptocurrencies have come into effect in Malaysia.

According to reports, the new regulation has classified cryptocurrencies, tokens and crypto assets as securities, which means they are now under the jurisdiction of the Malaysian Securities Commission.

In accordance with the change, any unauthorized cryptocurrency exchanges or initial coin offering (ICO) could face a 10-year jail sentence and fines to the tune of $2.4 million.

Malaysia / Law in progress

While the change may seem harsh at face value, the punishments for those not adhering to regulations are just the worst-case scenario.

According to various sources, the Malaysian government has expressed positive sentiments toward cryptocurrencies and blockchain technology, even though they’ve taken a hard line in classifying all cryptocurrencies as securities.

Malaysia’s positive outlook, despite blanket treatment

Malaysian news outlet The Star noted the positive attitude toward the sector, as Finance Minister Lim Guan Eng delivered the enforcement of the new regulations. According to Eng, the Malaysian government sees the potential of cryptocurrencies and blockchain technology to improve a number of sectors of its economy:

“The Ministry of Finance views digital assets, as well as its underlying blockchain technologies, as having the potential to bring about innovation in both old and new industries. In particular, we believe digital assets have a role to play as an alternative fundraising avenue for entrepreneurs and new businesses, and an alternate asset class for investors.”

This change in sentiment has come swiftly, considering that a Malaysian government minister had said the government was still undecided in its stance on cryptocurrencies last week.

Federal Territories Minister Khalid Abdul Samad made this statement on Jan. 12, according to New Strait Times:

“People have asked me if these (cryptocurrency and digital currency) currencies are legal or illegal. At the moment, the answer is neither legal nor illegal as the situation is still unclear.”

Nevertheless, the final outcome has met the timeline set out by the Malaysian government back in 2018. In December, the finance regulator and central bank had earmarked a final decision on regulation for the first quarter of 2019.

Effendy Zulkifly, who founded Crypto Valley Malaysia, told Cointelegraph that there was already a high level of awareness at a governmental level in the country, with the Central Bank of Malaysia creating a fintech sandbox and setting up a cryptocurrency unit.

Zulkifly believes the move is a positive one for businesses operating in the cryptocurrency space within Malaysia, as it removes any uncertainty around the legality of their operations:

“It is a good thing for the cryptocurrency market because we can [sic] a clear direction and are now recognised by government. There’s no need to be scared and no need to hide anymore. We can just follow the requirements by the government and do an ICO without fear anymore. For example, the Switzerland government is a model that recognised ICOs in their country. Their economy got stronger because the value of ICOs as Foreign Direct Investment.”

Harapan Coin

While the Malaysian government has been contemplating the direction to take with cryptocurrencies, there’s been plenty of controversy around a local cryptocurrency project linked to a political party.

As previously reported by Cointelegraph, the Harapan Coin came into existence in 2017 and has since been touted as a cryptocurrency used for funding a coalition of opposition political parties leading up to the country’s 2018 elections.

The Barisan Nasional had been in control of the country since its independence in 1957, but finally conceded power in 2018, when the Pakatan Harapan coalition took a majority of seats in the lower parliament.

Overcoming the lengthy stay of power was used as a major fighting point by opposing parties, and the Harapan Coin was directly linked to funding these opposition parties.

There has been some controversy surrounding this particular aspect of the project. The identities of people working on the project are obscure, and more than half of the funds raised has been allocated to system administrators and one of the political parties within the Pakatan coalition.

The Harapan Coin has been promoted by Khalid Samad, the Malaysian Minister of Federal Territories mentioned above. Overall, the project seemed to have been held at arm’s length by the Malaysian financial authorities and civil society groups.

A blanket approach

The Malaysian government and financial regulator have made a clear-cut decision to define cryptocurrencies as securities. The decision may have some interesting ramifications, but it’s a decision that gives clarity to businesses operating in the country.

It is, however, a very different approach compared to a country like the United States, which has taken an extended amount of time to consider how it should regulate cryptocurrencies and virtual assets.

Regulations governing securities have been applied to cryptocurrencies around the world in order to provide some sort of guideline to a technology and medium of exchange that is still in its infancy.

With that being said, the U.S. is looking to move in a different direction from the one taken by Malaysia. In December 2018, two U.S. congressman introduced a draft bill that hopes to exclude digital assets from being defined as securities.

United States / Law in progress

The bill wants the Securities and Exchange Commission (SEC) to adjust taxes related to virtual currencies, create a tax exemption for the exchange of different cryptocurrency tokens, as well as a change to the taxation of capital gains made on the sale and exchange of cryptocurrencies. The proposal essentially wants cryptocurrencies to be considered for what they are, and regulated in a manner that is fair to their use cases.

A prime example was the consideration of Ethereum as security, due to the nature of its token sale in 2014. American regulators looked long and hard at the situation before a final decision was taken to not consider Ethereum as a security in June 2018.

However, the simple truth is that Malaysia’s take effectively throws a blanket over all cryptocurrencies, ICO’s and their tokens.  For now, exchanges and blockchain companies will have to play by the rules or suffer the consequences laid out by Malaysian regulators this week.

The ideal situation

While a blanket approach seems to be the route Malaysian regulators have taken, it may not be the best way to approach the situation.

Cointelegraph reached out to Dr. Mattia Rattaggi, the chair of policy and regulation at the Crypto Valley Association, who provided a holistic view of global regulatory trends toward cryptocurrencies:

“As we know, the definition of securities differs from country / region to country / region. I am not familiar with the securities law in Malaysia, but the same principle should apply.”

As Rattaggi suggests, there seems to be no clarity on whether clear distinctions will be made between different types of securities and how cryptocurrencies and crypto assets will be individually classified.

“They seem to take the view that all cryptotokens are securities. But I do not know if they draw distinctions between payment, utility and securities tokens. Thus, in my view only cryptotokens that correspond to securities according the financial law prevailing in the country should be considered and regulated as securities.”

Nevertheless, regulation continues to be a major talking point around cryptocurrencies. Some feel this is a hindrance, but Rattaggi believes it is pertinent to ensure growth and development of the industry:

“I hold the view that the crypto economy is still in a phase where it needs more regulation rather than less. More regulation is needed to increase trust, to standardize more, and more importantly to get to the maturity level of interest to institutional money and investors.”

Chip Making Giant TSMC Reports Significant Drop in Crypto Mining Revenue

Chip manufacturing giant Taiwan Semiconductor Manufacturing (TSMC) reported a sizeable drop in its crypto mining-related revenue in 2018. The news was revealed in the company’s Q4 2018 financial results, published Jan. 17, together with an earnings call transcript.

TSMC has not disclosed specific data for its crypto mining business — including it instead within its high-performance computing (HPC) segment. In the earnings call transcript, TSMC CEO & Vice Chairman C.C. Wei revealed that whereas HPC, excluding crypto, had grown slightly:

“[C]ryptocurrency is a big drop from 2018 to 2019. So if we put the cryptocurrency together in the HPC, it’s a big drop. It’s almost a double-digit.”

Pressed to give more exact data, Wei only noted that cryptocurrency had contributed a lot to the manufacturer’s chip sales last year, yet emphasized the firm “cannot specify too much of the segment, particularly it belongs to one of the big customers.”

As reported, TSMC is known as a major supplier of Application-Specific Integrated Circuit (ASIC) chips to Chinese crypto mining behemoth Bitmain, which has been under increasing pressure during the persistent cryptocurrency bear market slump.

While a Bernstein analysis had attributed 2 to 3 percent of TSMC’s total revenue to cryptocurrency-related sales in February last year, Wei looked ahead to 2019 with considerably more circumspection:

“Okay. This year, we don’t forecast — we become conservative in forecasting this volatile business. So the cryptocurrency mining this year is much, much less than last year. And to what percentage, I don’t think it’s — I can release it right now.”

For Q4 2018 on a consolidated basis across its business, TSMC posted a revenue of $9.4 billion in Q4 2018 — a 10.7 percent increase from the previous quarter and a 2 percent rise year-over-year, according to the report. Lora Ho, chief financial officer and senior vice president of finance, stated that Q1 2019 revenue is forecast to be $7.3-$7.4 billion —  representing a 22 percent sequential decline.

As reported just this week, the bearish market continues to impact mining industry participants. Major  United States-based crypto mining and blockchain firm Giga Watt has just announced it is closing access and power to its facilities and stopping day-to-day operations, after having filed for bankruptcy in November last year.

Bitmain continues to wind back its multinational operations, this month reportedly suspending its mining in the U.S. state of Texas, after having closed its development center in Israel and laying off local employees at the end of last year.

Law Enforcement Requests to Shapeshift Rose 175% in Second Half of 2018

Law enforcement requests sent to Switzerland-based cryptocurrency exchange ShapeShift rose 175 percent in the second half of 2018, according to a new Compliance Transparency report published by the exchange Jan. 18.

In a blog post accompanying the report, Shapeshift outlines that it typically receives requests from law enforcement agencies for data including crypto addresses (in or out of the Shapeshift system), transaction IDs, identity information (names, emails, IP addresses), cryptocurrency or crypto asset information and more. ShapeShift emphasizes that in most cases it is not informed of the details of the investigation or probe for which the data is being gathered.

The report reveals that Shapeshift received a total of 44 subpoena requests in Q3 and Q4 2018 — a 175 percent increase as compared with a combined total of 16 in the preceding two quarters. These break down as 6 subpoenas in Q1, 10 in Q2, 19 in Q3 and 25 in Q4.

2018 law enforcement requests sent to ShapeShift

2018 law enforcement requests sent to ShapeShift. Source for data: ShapeShift

In terms of geographic jurisdictions, the highest number of requests over the year came from United States-based agencies — accounting for 18 out of a total of 60 global inquiries. Among these, 6 came from the FBI, 5 from the Securities and Exchange Commission (SEC), 3 from state level authorities, 2 from the Department of Homeland Security (DHS) and 1 from the Commodities and Futures Trading Commission (CFTC).

German agencies accounted for the second-highest number of inquiries by country — issuing 8 requests — followed by the United Kingdom, with 6, and France, with 4.

ShapeShift claims it is usually able to provide the requested information within a 1-2 week time frame, and that it complied with every verified request it received in 2018. As the exchange notes, the uptick in its law enforcement inquiries over the year correlates with that seen by other exchanges. As previously reported, subpoenas to crypto exchange Kraken increased three-fold in 2018, as compared with the preceding year.

ShapeShift’s blog post takes pains to emphasize that its experience with law enforcement is typical, citing TechCrunch founder Michael Arrington’s statement when his $100 million crypto hedge fund was probed by the SEC in March 2018: “We received a subpoena. Every [crypto] fund I’ve talked to has received one…”

As reported last fall, ShapeShift was prompted to refute allegations of facilitating money laundering, after being implicated in a Wall Street Journal report that claimed $9 million in ill-gotten funds had been funnelled through its platform.

As a non-custodial platform, Shapeshift historically did not impose user identification requirements on traders — although this is now changing since the platform began to evolve a mandatory membership model in September.

Grayscale Adds Stellar as Latest Cryptocurrency Investment Trust

Digital currency investment group Grayscale confirmed it had successfully launched its latest fund, dedicated to Stellar’s Lumens (XLM) token, in a tweet Jan. 17.

Grayscale, which now operates nine cryptocurrency funds, timed the move to coincide with a change of image for its products, renaming all its single-currency products to trusts.

The company serves “single-asset investment products that provide exposure to” Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), Ethereum Classic (ETC), Horizen (ZEN), Litecoin (LTC), Ripple (XRP) and Zcash (ZEC), along with Stellar.

Speaking to Fortune, managing director Michael Sonnenshein said the latest addition had arisen from investor demand to gain exposure to XLM’s price movements.

“I think the theory is a sound one,” he said about Stellar’s business proposition for bridging crypto to fiat currency conversions, continuing:

“An American bank may be keeping large amounts of currencies in foreign banks, and to be able to bring those balances of foreign currencies onto a balance sheet as working capital is valuable. Financial institutions won’t be required to hold balances all over the place. This will improve efficiency and shore up balance sheets for other uses.”

Stellar saw a buoyant Q4 after a deal with cryptocurrency wallet provider to distribute XLM worth $125 million in an airdrop, with the aim of increasing awareness and adoption.

Grayscale meanwhile faced a mixed year in 2018. By December, after Bitcoin had fallen to 15-month lows of $3,130, the company’s Bitcoin Trust became worth less than $1 billion for the first time during the year.

Research by cryptocurrency industry newsletter Diar at the time added that Grayscale’s holdings amounted to just over 1 percent of the total number of bitcoins in circulation.

Stellar is currently up 1.22 percent on the day, trading at $0.10.

Crypto Exchange Coinbase Acquires San Francisco-Based Tech Startup Blockspring

Major cryptocurrency exchange and wallet provider Coinbase has acquired Andreessen Horowitz-backed tech startup Blockspring. The purchase was revealed in a blog post published Jan. 14.

San Francisco-based Blockspring produces tools that enable developers to automatically gather and process information from application programming interfaces (APIs).

In 2015, the company raised $3.4 million in a round led by venture capital firm Andreessen Horowitz and seed-stage investment firm SV Angel, while also having support from venture fund Y Combinator.

Following the acquisition, Blockspring will reportedly continue operating as an independent entity, while any changes to its business will not be binding on the company’s current and new customers.

Last month, Cointelegraph reported that a new application filed by Coinbase with the United States Patent and Trademark Office (USPTO) revealed that the exchange is seeking  to trademark the crypto-industry term “BUIDL.”

The application revealed that Coinbase’s “BUIDL” software as a service (SaaS) solutions would include “software for managing, buying, selling, storing, transacting, exchanging, sending and receiving virtual currency.” Later in December, it was reported that Coinbase decided to drop its application.

In August, Coinbase acquired San Francisco-based startup Distributed Systems Inc., which works on decentralized identity solutions. With the new acquisition, Coinbase will purportedly work toward a decentralized identity system that will “let you prove that you own an identity, or that you have a relationship with the Social Security Administration, without making a copy of that identity.”

According to CoinMarketCap data, Coinbase is ranked 39th largest exchange in the world, with nearly $68 million in daily trade volume as of press time.




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