Nice research – An estimated 2.6 million UK consumers have bought cryptoassets at some point, new FCA research reveals.

It is nice, since it comes from independent organization. Some highlights from the research:

The FCA commissioned research to gain insight into the size of the market and identify
potential harm. Through a nationally representative survey of 2,132 UK consumers and 31 in-depth interviews, this research provided invaluable insights into the size of the market and where potential harms could be found. It concluded that the size of the market was relatively small with 3% of consumers having ever bought cryptoassets, spending on average £200. It also showed that awareness of cryptoassets among the general population was low.

The FCA chose to use the term ‘cryptocurrency’ throughout the research. This
term is more widely used in public domain than the broader ‘cryptoasset’ term it tend to prefer. The FCA also use ‘exchange’ to represent ‘cryptoasset trading platforms’, given
‘exchange’ is widely understood and used by consumers.

Most cryptocurrency owners appear to understand the lack of regulatory protections and demonstrate some awareness of the technology underpinning cryptocurrencies. Also, they acknowledge that prices are highly volatile and may fall.

Consumers appear increasingly aware of cryptocurrencies, as 27% had never heard of
cryptocurrencies this year, compared with 58% in our survey last year. The number of
consumers aware of cryptocurrencies has significantly increased. A possible explanation
for this increase in awareness may relate to the increased media presence. Bitcoin was
the most recognised cryptocurrency and, whilst Libra does not yet exist as a  cryptocurrency, 22% had heard of Libra. The list of cryptocurrencies included unlaunched ones (Libra), to capture awareness of potential cryptocurrency players.

When asked why they bought cryptocurrencies, 47% said they bought cryptocurrencies
‘as a gamble that could make or lose money’ compared with 31% in the 2019 consumer
research (noting this year’s survey was online whilst last years was face to face) as one
of the main reasons.

More people are first hearing about cryptocurrencies through the media, with ‘traditional media’ being the place where people are most likely to have first heard about cryptocurrencies.

Over 25% use cryptocurrencies to purchase goods and services, nearly half have never done anything with them, suggesting people purchase them with the hope of making a return.
In general, cryptocurrency holders expect to hold them for long periods of time.

According to the research, we can conclude that Cryptoassets, at the moment, are more like gold or commodity, rather than a currency (place to store value rather than a currency like EUR/GBP/USD).

 

Understanding the money laundering needs via informal/formal stakeholders public speeches

It was interesting to read the following speech of Therese Chambers, Director of Retail and Regulatory Investigations.

Crypto businesses may want to consider the following when proving services via a UK entity:

Under the MLRs, any firm undertaking one of the specified cryptoasset activities is required to satisfy the FCA when they arrive at our authorisations team that they have:

Risk assessment: to identify where the risks of money laundering lies in their business and establish policies and procedures to tackle them.

Customer Due Diligence (CDD): as there is a zero threshold for all activity in this sector, all transactions, whether occasional or part of an ongoing business relationship, will need to be subject to CDD. This means identifying the customer and verifying their identity on the basis of reliable and independent documentation or information. As cryptoasset activities are online, then they will need to establish the veracity of the information provided to ensure the person on the other side of the screen is who they claim to be. We expect that many will apply similar approaches to e-money and challenger banks who often deploy new technologies such as video/photo identification via mobile.

Transaction monitoring: cryptoasset firms will need to monitor the transactions that they execute on behalf of their customers to identify any potential suspicious or unusual transactions that indicate a risk of money laundering. While we know of several services that offer blockchain analytics software which can help with this task, we will still require that firms have the right processes in place to evaluate transactions. This is because all FCA regulation is underpinned by the notion that you can outsource work but not responsibility.

Record keeping: the MLRs require all firms to retain documents and information used as part of CDD and transaction monitoring for a period of 5 years after the end of a business relationship, but they do not need to be kept for longer than 10 years since the start of that relationship.

Suspicious Activity Report (SAR) reporting: where a firm identifies suspicious activity that they have reasonable ground to suspect is the proceeds of crime then they need to make a SAR and send it to the National Crime Agency (NCA).

When a firm arrives at the FCA’s gateway looking to apply for registration, we believe that a ‘good’ application will clearly demonstrate to our authorisations team that they have robust systems and controls to cover each of these areas. But fundamentally, we are looking for more than just whether the firm has the right policies and procedures, we need to be satisfied that the firm take seriously their responsibilities to prevent their business being used to launder the proceeds of crime.

The FCA’s crypotasset AML regime is still in its infancy, as it only came into effect on the 10 January 2020. We are expecting several key challenges. First, this is largely a market that is new to regulation, and since the premise of the technology comes from a libertarian strand of ideology which eschews identity checks and advocates digital privacy, so we are expecting compliance with AML regulation will be met with resistance. But we are keen to work with the industry to ensure our AML standards are met in this market, particularly since this sector is closely integrated with traditional financial services.

 

Digital Assets and Related Investments – What You May Need to Consider

Is it direct holdings of digital assets? If not, you may need more details about the financial product. Is it future contract, OTC contract, an option? Please get more details, and consult with your financial expert/advisor/adviser.

Custody, where the digital asset stored? Is it regulated exchange? where is it regulated? Off-shore regulated entities may be more risky than US/UK/GERMAN/AUSTRALIA/FRANCE/SWITZERLAND regulated entities 🙂

Manipulation in the digital asset markets. Can the digital asset price can be manipulative easily? If yes, the asset price can be very volatile, and you may lose your invested capital.

Fee disclosure – do you know everything about the fees you will be charged? some business can cut a large sum from your invested capital, in order to make their business richer.

Liquidation – If you will need your funds back, how fast you will be able to get it back into your bank account? Some asset are not very liquidated, and you will not be bale to exchange your digital asset back to FIAT. You may not be bale to pay your monthly expenses, including rent, electricity, mortgage, since those can only be paid with FIAT (EUR, USD, GBP, AUD, NOK, SEK etc.).

Technology and user friendly – do you know how to handle the registration process, where do you see all the disclosures, terms and conditions, your account balance, your account status, user interface, broker contact details? If not, make sure you control everything more than perfectly. No one else will do it instead of you.

What is your risk tolerance? if it is very low, you may need to consider more traditional investments, the regular stock market may be better option (S&P 500 stocks can be better option for you).

No investment products are absolutely risk-free. This can be particularly true with novel and previously-untested investment strategies. Investors should proceed with caution, ask questions, and consider their risk tolerance before investing.

Life is risky, and so is investing.

Bitcoin auto-trading or anything alike

Please remember, those auto-trading services may not be regulated. They can tell you anything, and promise you the sky, but there is a chance you will not get your money back.

Please consult with your financial adviser, it worth your money. However, please remember that you should question your Financial Adviser work.

Do not use an advice without question it. You should do your own research, in order to question your Financial Adviser work.

Please make sure your your Financial Adviser is registered and license. The financial Adviser’s license is here to protect you, therefore, please make sure you check it.

If your Financial Adviser is not registered or license, you should not use its services/advice.

If you search on google “Bitcoin Trader auto-trading” you may get to https://gunbot.shop/store/ or https://www.ifcmarkets.com/en/contact-us, it seems that those websites do not have any valid/real license. If you invested through them, your money might be at risk.

It is not be fair to blame Google, they are not the regulator, but you can report about those ads to Google. Google might provide you more details about who is behind those ads, and/or stop such ads.

Some regulators are trying to fight back against those crypto frauds. For example FSMA (Belgium). FSMA issues the following:

List of cryptocurrency trading platforms about which the FSMA has received questions/complaints from consumers and has identified signs of fraud. Please find attached a link for the full list.

In addition, FSMA issued the following alert:

Cryptocurrency trading platforms: beware of fraud!

In recent weeks, a large number of new platforms offering all and sundry the chance to
invest in cryptocurrencies have appeared on the internet. The FSMA warns the public
about these new platforms, since often there are fraudsters behind them who are now
using cryptocurrencies to swindle consumers. Please find attached a link for the warning. If you heard/read the following, then you should read the alert again:

“Invest in cryptocurrencies with full confidence.”
“Invest in digital currencies in full confidence on one of the most renowned platforms on the market.”
“XXX: trading in cryptocurrencies easily accessible at last!”

Sec statement and DC Blockchain Summit March 7 2018

Please note that according to the sec statement as of March 7 2018:

The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not.  Many platforms refer to themselves as “exchanges,” which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange.  Although some of these platforms claim to use strict standards to pick only high-quality digital assets to trade, the SEC does not review these standards or the digital assets that the platforms select, and the so-called standards should not be equated to the listing standards of national securities exchanges.

Please find attached a link for the full statement. Please don’t get confused, and remember that some “exchanges” are not regulated by the sec.

Highlights from the keynote Address by Commissioner Brian Quintenz before the DC Blockchain Summit:

in the spot markets for commodities, neither the CFTC nor any other federal agency has that same oversight authority. This means the agency cannot impose things like registration requirements on platforms or participants in the cash markets, surveillance and monitoring requirements on spot platforms, or otherwise require compliance with business conduct standards or other trading requirements. The CFTC only has enforcement authority to police fraud and manipulation in the actual trading of commodities. Pursuant to this enforcement jurisdiction, the CFTC can investigate potential fraud and manipulation in the underlying virtual currency spot markets.

I think we’ve come to the point with cryptocurrencies where an independent body must step up, establish, and enforce the rules of play. It is my hope that cryptocurrency platforms in the United States will consider the many benefits, including enhanced credibility, that the establishment of an SRO-like organization may provide. Moreover, in light of the global market for cryptocurrencies, and the efforts currently underway in the United Kingdom and Japan, there is no reason why a private, cryptocurrency oversight body could not achieve global significance.

Please find attached a link for the full keynote address. It means that the Cryptocurrency world is not fully supervised and regulated. Moreover, if the local players will cooperate together fairly, it will be for the best interest of the Cryptocurrency market (all players and clients alike).

Insider trading, FBI, Coincheck, Bitconnect, OneCoin, Tether

Six important stories:

  1. Please play fair. Insider trading will always be caught. Please find attached an example for an insider trading litigation case. Just stay away from it.
  2. The FBI need your help. Please review the below:
    If you have received any previous communications about your investments with Banc de Binary from someone claiming to be from a government agency, please fill out the questionnaire attached. Based on the answers you provide, the FBI or the SEC may wish to contact you to find out more about what happened.
  3. According to cointelegraph.com, Japanese cryptocurrency exchange Coincheck, one of the largest in the country, was the victim of a massive hack resulting in a loss of $534 mln. Please find attached a link for the full story. Exchanges must be regulated by a security commission, there is no other way.
  4. According to cointelegraph.com, Former BitConnect investors have filed a class action lawsuit, seeking compensation from the company that was found out to be a ponzi scheme and has shut down on Jan. 17, 2018. Please find attached a link for the full story.
  5. According to cointelegraph.com, OneCoin offices were raided and its servers seized in Sofia, Bulgaria, as yet another step in a series of international raids and court cases against the highly-controversial altcoin. Although the servers were shut down, OneCoin currently remains operational. Please find attached a link for the full story. If you want to avoid ponzi scheme, please search your entity at behindmlm.com/ (the people of behindmlm, are doing good service for the public).
  6. Tether is an unregulated cryptocurrency token that was issued on the Bitcoin blockchain. Although no audits are publicly available, according to Tether Limited, each unit of Tether is backed by one United States dollar held in reserve by Tether Limited, and may be redeemed through the Tether Platform. Please note that some people think it is a ponzi scheme. Please find attached an example for a very important economist who think it is a ponzi scheme (link).

Western Union, Cold-calling, IOTA wallet, bitFlyer, Benebit ICO, My Big Coin and Bitcoin Money Laundering

Seven interesting stories:

  1. Victims Scammed Via Western Union May Get Refund – If you need to get a refund, please visit ACCC website for more details. You will have to fill out a form and send documents, but it might be worth trying.
  2. Cold-calling – we need to continue to report those unwanted calls. In the UK a company director was disqualified (can’t run or be involved in the management of another company). The company he managed made unsolicited calls for direct marketing purposes. Please find attached a link for the full press release.
  3. If you are dealing with IOTA , please do not use online seed generators. According to some news outlets around $4m worth of IOTA were stolen, therefore, it is advisable to review the attached reddit post.
  4. bitFlyer EUROPE S.A. Obtains Payment Institution License and Launches Service in Europe. Please find attached a link for the full press release. It is a good sign for EU cryptocurrency users, since now they are more protected.
    According to the press release, in addition to the above, bitFlyer was registered as a virtual currency exchange by the Japan Financial Services Agency in September 2017, and bitFlyer USA is licensed to operate in 42 states as of November 2017.
  5. According to bitcoin.com, Benebit ICO has pulled an exit scam, making off with a reported $2.7 million of investor funds. Please find attached a link for the full story.
  6. CFTC Charges Randall Crater, Mark Gillespie, and My Big Coin Pay, Inc. with Fraud and Misappropriation in Ongoing Virtual Currency Scam. Defendants allegedly solicited more than $6 million for investments in a virtual currency known as “My Big Coin”. According to the press release “My Big Coin” is a Ponzi scheme.
    Please find attached a link for the full story.
  7. New Study Finds Patterns in Money Laundering through Bitcoin. It is the first public domain analysis of how illicit digital currency is laundered around the globe.
    According to the article attached, Bitcoin gambling sites, “mixers” and European Bitcoin exchange may be the destinations of choice for criminals looking to launder bitcoins.

 

GTK Enforcement Actions and Enforcement agency

GTK – three enforcement actions and one enforcement agency statement (ESMA):

  1. CFTC Charges Colorado Resident Dillon Michael Dean and His Company, The Entrepreneurs Headquarters Limited, with Engaging in a Bitcoin and Binary Options Fraud Scheme
    The complaint alleges that defendants solicited customer deposits using the online media and false claims. The defendants claimed that customers’ funds would be pooled and invested in commodity options on behalf of customers. But, as alleged, defendants were not actually engaged in trading on behalf of their customers, and defendants’ purported trading profits were fictitious. The defendants misappropriated over $1 million in customers’ funds, while Dean has launched another similar purported trading venture under the name Real Trade Profits, using a website to solicit customers to deposit Bitcoin for a pooled investment in binary options trading and promising high rates of return.
  2. CFTC Charges Patrick K. McDonnell and His Company CabbageTech, Corp. d/b/a Coin Drop Markets with Engaging in Fraudulent Virtual Currency Scheme
    The CFTC complaint alleges, McDonnell and CDM engaged in a deceptive and fraudulent virtual currency scheme to induce customers to send money and virtual currencies to CDM, purportedly in exchange for real-time virtual currency trading advice and for virtual currency purchasing and trading on behalf of the customers under McDonnell’s direction. In fact, as charged in the CFTC Complaint, the advice was never provided, and customers who provided funds to McDonnell and CDM to purchase or trade on their behalf never saw those funds again. In short, McDonnell and CDM used their fraudulent solicitations to obtain and then simply misappropriate customer funds.
  3. The Massachusetts Securities Division is charging a resident of the state with violating securities laws through an initial coin offering (ICO)
    According to the complaint, the company and its founder, violated Massachusetts securities law in the way they designed, promoted and sold “Caviar tokens,” which are units of cryptocurrency that entitle their owners to receive a portion of the profits from Caviar’s investment activities.
    The Massachusetts Securities Division — which labeled Caviar’s ICO a “cryptocurrency scheme” — wants Caviar to shut down the ICO, return all the money paid so far, and pay an administrative fine.
  4. ESMA published a statement explaining, that it was considering the possible use of its product intervention powers, to address investor protection concerns posed by the marketing, distribution and sale of CFDs and binary options to retail investors.
    It is now seeking evidence from stakeholders on the impact of the following proposed measures:
    Contracts for Difference
    The specific potential measures under consideration are:
    i. Leverage limits on the opening of a position by a retail client. These would range from 30:1 to 5:1 to reflect the historical price behaviour of different classes of underlying assets;
    ii. A margin close out rule on a position by position basis. This would standardise the percentage of margin at which providers are required to close out a retail client’s open CFD;
    iii. Negative balance protection on a per account basis. This would provide an overall guaranteed limit on retail client losses;
    iv. A restriction on the incentivisation of trading provided by a CFD provider; and
    v. A standardised risk warning by CFD providers. This would include an indication of the range of losses on retail investor accounts.
    ESMA is also considering whether CFDs in cryptocurrencies should be addressed in the measures.
    Binary Options
    The potential measure under consideration is a prohibition on the marketing, distribution or sale of binary options to retail investors.

Kodak, AMERI Holdings, Recon Technology, SPI Energy and NQ Mobile

The common between Kodak, AMERI Holdings, Recon Technology and NQ Mobile is blockchain-related news.

Once the blockchain-related news announced, those stocks started to move sharply, for example:

Following the news about Eastman Kodak Initial Coin Offering (ICO), the company’s shares rallied from $3.1 on 08.01.2018, closing at $6.8 on 09.01.2018, and $10.70 on 10.01.2018. Furthermore, the trading volume soar from $255,700 on 08.01.2018 to $71,427,400 on 09.01.2018, and up to $107,512,900 on 10.01.2018. On 16.01.2018 the trading volume and the stock price were still higher, compared with 08.01.2018 ($8,624,122 and $8.5, respectively).

Following AMERI Holdings announcement (establishment of a blockchain initiative aimed at improving supply chain visibility, transparency and efficiency), the company shares soar from $3.42 on 09.01.2018 to $5.88 on 10.01.2018. In addition, the trading volume increased from $30,300 on 09.01.2018 to $13,615,800 on 10.01.2018. On 16.01.2018 the trading volume and the stock price were still higher, compared with 09.01.2018 ($532,200 and $3.98, respectively).

Following Recon Technology announcement (to Create Blockchain Mobile Shopping System), the company shares soar from $1.71 on 12.01.2018 to $3.03 on 16.01.2018. Additionally, the trading volume increased from $666,500 on 12.01.2018 to $46,088,600 on 16.01.2018.

Following SPI Energy announcement, that it has established a strategic partnership with Hoofoo Inc. (“Hoofoo”), the leading hack-proof cryptocurrency wallet for iOS and android phones, the company shares soar from $0.63 on 12.01.2018 to $1.04 on 16.01.2018. In addition, the trading volume increased from $178,400 on 12.01.2018 to $18,032,800 on 16.01.2018. On 18.01.2018 the trading volume and the stock price were still higher, compared with 12.01.2018 ($19,540,956 and $1.09, respectively).

Following NQ Mobile announcement (plans to integrate blockchain and AI capabilities into their CarBrain project for software-designed cars), the company shares soar from $3.98 on 09.01.2018 to $4.53, opening price on 10.01.2018. Moreover, the trading volume increased from $694,100 on 09.01.2018 to $8,425,200 on 10.01.2018.

We feel it is needed to ask the following questions:

Is the share price increase can be justified? Is it FOMO (fear of missing out)? Is it only hope that something good will come out of this new business model? Is it a bubble?

We can think about few good answers for those questions, but we think you already know the answer.

Please note, the stocks mentioned are volatile, and therefore may be very risky. You should consult with independent financial adviser, before making any investment decisions.

You should only use register financial adviser, if things goes wrong, he/she may have professional liability insurance, and you may be able to get back your money.

The difference between Iced Tea and Blockchain is 400%, is it crazy?

According to bitcoin.com, the beverage firm Long Island Iced Tea Corp rebranded to “Long Blockchain Corporation”, and its share price increase by more than 400%. The initial rebrand announcement revealed the company’s intentions to pivot its business model.

The latest business move shows LBC is planning to operate a mining facility located in the Nordic country.

Few days ago we reported about a similar story, UUBI Blockchain Internet Ltd, which is a startup company with no revenues, but it’s share value jumped about 1,000%.

In addition, you can read about LongFin Corp(LFIN), Digital Power Corp. (DPW), Riot Blockchain (RIOT), Seven Stars Cloud Group, Inc.(SCC), and Siebert Financial Corp. (SIEB) at wolfstreet.com. According to the post, those stocks soared due to blockchain-related activity. According to the post, those companies have minuscule or no revenues, though their combined market capitalization is many billions.

According to the below quote from wolfstreet.com article, we are in a very late stages of a bubble:

That these companies get away with this, that in fact speculators fall for this crap, that they’re stupid enough to bet what are in aggregate many billions of dollars in a matter of seconds after “blockchain” flashes across their screens, is a sign of just how far the global flood of liquidity has befuddled the minds of these speculators and turned them into knee-jerk betting automatons. This phenomenon happens only during the very late stages of a bubble.

The questions which have been raised are as follows:

Is the share price increase can be justified? Is it FOMO (fear of missing out)? Is it only hope that something good will come out of this new business model? Is it a bubble?

We can think about few good answers for those questions, but we think you already know the answer.

Please note, the stocks mentioned are volatile, and therefore may be very risky. You should consult with independent financial adviser, before making any investment decisions.

You should only use register financial adviser, if things goes wrong, he/she may have professional liability insurance, and you may be able to get back your money.