Day: September 5, 2016

Microsoft Launches Smart Contracts

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The First week of September was positive for Bitcoin enthusiasts as the currency is healthily trading over $600 levels. With steady volumes being traded, analysts are expecting a big swing that might take the price upwards of $720. While Microsoft launching Smart Contracts might be one factor, let’s look into other positive highlights of the week:

Microsoft and Smart Contracts

Microsoft has announced that it is forming a dedicated group for improving smart contracts security. The group named as ‘Kinakuta’, aims to make it easier to share information and tips about smart contracts. Smart Contracts refer to self-executing blockchain-based code that could automate complex transactions. Concerns about the contracts have grown after vulnerability led to the collapse of the technology’s first large-scale implementation. There has been a growing realization that smart contracts are new and can sometimes be dangerous if used improperly.

However, Microsoft’s director of business development and strategy Marley Gray believes new tools might help developers avoid future mistakes.

Gray told:

“We feel there’s a huge opportunity here to involve the community. Kinakuta is the community building around Microsoft best practices and elsewhere, to collect best practices and tools and involve developers in creating these best practices.”

Australia to end Bitcoin Double Tax

The Australian Treasurer and the FinTech Advisory Group met on Friday to further discuss the development of innovation. Among topics focused on were blockchain technology and ending the double tax for digital currencies, including bitcoin. The meeting discussed various FinTech topics, including a review of opportunities for blockchain technology. Also, the government reiterated that its intention is to stop the ‘double taxation’ of digital currencies under the GST regime. Currently, consumers in the land down under are ‘double taxed’ when using digital currency to buy anything already subject to Goods and Services Tax (GST). The Australian Tax Office (ATO) does not consider bitcoin and other cryptocurrencies money or foreign currency.

On the same lines popular peer to peer bitcoin exchange LocalBitcons has announced reduction of trading fee for bitcoin trades in UK. After Brexit, there was a fall in Sterling Pound Valuation. This move is aimed at increasing bitcoin trades among UK customers. Starting from September 5th, the transaction fee has been halved for all the customers in UK.

Japanese organizations launch Blockchain Collaborative

The University of Tokyo, The University of Aizu, Center for Global Communications (GLOCOM), and Soramitsu Co.  have partnered to study “smart currency” effects on regional development. The working groups will experiment with distributed ledger technology. The Universities and Global communications have taken up theoretical research on the applications in most of local regions. Fintech startup Soramitsu, a company using blockchain technology to create a digital identity platform, is handling the industry application part. Soramitsu is a member of the Linux Foundation’s Hyperledger Project, which aims to create international industry-wide distributed ledger standards.

 How ripples of these events would further effect the price, has to be seen in the coming week.

5 Cryptocurrencies Investors Should Watch

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Cryptocurrencies Climate

Bitcoin has existed in the public eye as the poster child for cryptocurrencies since its creation in 2009. Cryptocurrency is a broad term, encompassing digital or virtual currencies that use cryptoraphy for security, not issued by any central authority 1. Since the inception of Bitcoin, the underlying technology of the blockchain has attracted attention from institutions and investors 2. As a byproduct of this attention, developers have been inspired to imitate the Bitcoin model with new cryptocurrencies. As a pioneer in the field of blockchain technology, Bitcoin has enjoyed and continues to enjoy a dominant market status. However, in recent months, other cryptocurrencies have gained traction, reflected in their growing market caps.

Cryptocurrency Historical Performance

Cryptocurrency Historical Performance.001

Source: CoinMarketCap,  Figure 1: A retrospective graph of today’s five largest cryptocurrenciesy 3

This change is not only reflected in the raw growth of other cryptocurrencies, but also in Bitcoin’s declining share of the total market cap. From September 2015 to September 2016, Bitcoin’s market share fell from 85% to 79%, with a high of 91% in January 4.

Competitors

  1. Bitcoin: Bitcoin remains the largest competitor in the cryptocurrency market, nearly 10 times the market cap of its nearest competitor.
  2. Ethereum: Ethereum is a decentralized platform for smart contracts, powered by the blockchain 5.
  3. Ripple: Ripple is a transaction technology for financial institutions to correspond without a central counterparty 6.
  4. Litecoin: Litecoin echoes the Bitcoin system as an online, mineable currency 7.
  5. Monero: Monero’s platform is focused on providing security and privacy for people interested in online currency 8.

Implications for Bitcoin

Bitcoin’s success will depend on its relative position to its competitors. As new technologies emerge, investors should monitor the successes of emerging cryptocurrencies. Continued decrease in Bitcoin’s total market share could signal trouble for the value of Bitcoin.

Despite Bitcoin’s waning total market share from September 2015 to September 2016, the market cap experienced tremendous growth over this period. While the growth of these competitors may initially seem to condemn Bitcoin to being overtaken, selecting today’s top cryptocurrencies creates an inherent sampling bias. During these same months, other cryptocurrencies decreased in value. The list of the top five cryptocurrencies of 2015 is a different list than exists today. By most measures, Bitcoin remains on top.

Sources

  1. Investopedia: Cryptocurrency 
  2. Morgan Stanley: Big Banks Try to Harness Blockchain
  3. Coin Market Cap: Historical Charts
  4. Coin Market Cap: Market Caps
  5. Ethereum
  6. Litecoin
  7. Ripple
  8. Monero

4 Federal Agencies with Bitcoin Jurisdiction

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As a new monetary system with a widening base of users, Bitcoin is highly susceptible to government regulation. Government agencies enact and execute the policies of the federal government. These agencies seek to protect the citizens of the United States from fraud, crime, and duplicity. Consequentially, their intervention can disrupt or alter the existing structures of Bitcoin. Investors in Bitcoin should be aware of the policies and expectations of these agencies, in order to understand the value of Bitcoin and comply with current laws. This article examines the mission statements, developments, and policies of four U.S. government agencies with varying degrees of jurisdiction over Bitcoin.

U.S. Commodity Futures Trading Commission (CFTC)cftc

“The mission of the Commodity Futures Trading Commission (CFTC) is to foster open, transparent, competitive, and financially sound markets, to avoid systemic risk, and to protect the market users and their funds, consumers, and the public from fraud, manipulation, and abusive practices related to derivatives and other products that are subject to the Commodity Exchange Act.” –CFTC.gov

The CFTC actively monitors and responds to market failures. In response to the failure of Bitcoin exchange Bitfinex, the CFTC filed and settled charges in June 2016 for failure to register as a commission merchant as mandated in the commodity exchange act and for offering illegal transactions. Given that Bitfinex is a Hong Kong based exchange, this story signals the wide reach of cryptocurrency regulations and the importance of building international regulatory awareness.

U.S. Securities and Exchange Commission (SEC)sec

“The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” –SEC.gov

The SEC also exists to protect markets, with a greater focus on investor protection than the CFTC. In another piece of recent news, the SEC charged Connecticut-based companies GAW miners and ZenMiners for fraudulent mining activity. The companies were selling shares of their Bitcoin profits, supplied by their Bitcoin mining activities. However, they sold more shares of computing power than they had and were unable to meet their promises to investors. Consequentially, the SEC intervened. This instance demonstrates that Bitcoin investors and business owners alike need to be wary of new business models.

Internal Revenue Service (IRS)irs

[The IRS mission is to] “provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all.” –IRS.gov

Currently, the IRS treats virtual currency as property for federal tax purposes. More information and FAQs can be found on the IRS website. Investors should consult the IRS website in order to abide by the laws associated with the developing status of Bitcoin.

Financial Crimes Enforcement Network (FinCEN)fincen

“FinCEN’s mission is to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.” –FinCEN.gov

In addition to its services, FinCEN provides a comprehensive list of anti-money laundering laws. In considering transactions, investors and businesses should consult the FinCEN anti-laundering website to help avoid illegal activities.

Government logos sourced from wikipedia.
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