In this issue:

Libra Cryptocurrency Plans Released, Crypto Exchanges and Payment Options Expand

Blockchain Ripples Into Incumbent Financial Institutions in the U.S. and Abroad

Blockchain to Enhance Drug and Seafood Supply Chains, Energy and Insurance Sectors

U.S. Enforcement Actions Target Cryptocurrency Fraud Schemes and Darknet Markets

Libra Cryptocurrency Plans Released, Crypto Exchanges and Payment Options Expand

This week, the world’s largest social media company published details on its plans to launch Libra, a new cryptocurrency that would be backed by a basket of fiat currencies and other traditional assets. According to the Libra white paper, the Libra cryptocurrency would be hosted on a permissioned network governed by a Swiss nonprofit foundation and co-hosted by nodes run by an initial group of 28 founding member firms. The founding member firms include well-known companies from the payments, technology, telecommunications, blockchain and venture capital industries. The day after Libra was announced, the U.S. Senate Banking Committee set a date for hearings to examine the venture, and soon after, France, which holds the rotating presidency of the G7, announced a G7 task force to examine how cryptocurrencies such as Libra are regulated.

Late last week, Binance, the world’s largest cryptocurrency exchange by volume, announced that it will soon stop serving U.S. customers as it begins plans to launch a U.S.-based affiliate exchange that will be licensed and regulated under U.S. laws. In another announcement this week, two U.S.-based technology startups released details on an initiative that would enable customers on the world’s largest e-commerce platform to pay for purchases using ether and other ERC20 tokens hosted by the Ethereum Network.

This week, the Litecoin Foundation announced plans to release a physical cryptocurrency debit card that would allow cardholders to spend Litecoin using traditional credit and debit point-of-sale systems. And according to data released by a Chicago-based global derivatives marketplace, interest in bitcoin futures contracts spiked to an all-time high this week. The data was accompanied by remarks indicating increased interest in bitcoin futures from institutional investors.

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Blockchain Ripples Into Incumbent Financial Institutions in the U.S. and Abroad

Early this week, cryptocurrency company Ripple acquired a stake in a major money transfer company. As part of the deal, the transfer company agreed to incorporate Ripple’s xRapid product, which utilizes the cryptocurrency XRP, in its cross-border payments process.

According to reports, Reykjavik-based Monerium ehf recently became the only blockchain company in the world so far that is licensed to operate as an electronic money company under the EU’s E-money Directive. The Financial Supervisory Authority, which oversees financial services in Iceland, was the decision-maker behind this financial regulatory first.

The Italian Banking Association (ABI) has announced that it will be implementing distributed ledger technology to improve the transparency and frequency of interbank reconciliation. The country’s banks could be using the technology as early as March 2020, per the ABI.

Finally, a multinational banking group is rolling out a solution that integrates “tokenization technology” to automate the accounts receivable process. Australian fintech company Identitii Limited developed the technology.

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Blockchain to Enhance Drug and Seafood Supply Chains, Energy and Insurance Sectors

This week, Forbes reported that the U.S. Food and Drug Administration has approved a partnership between a drug company, its distributor and others to undergo a pilot project using blockchain to track prescription drugs and vaccines from production to purchase in order to prevent counterfeit, stolen or contaminated medicines. In more supply chain news, according to an online newsletter on food safety, the National Fisheries Institute, a U.S.-based trade association representing seafood companies from harvesters to restaurants, is working with a large information technology company to test whether implementing blockchain into the seafood supply chain can create more transparency and reduce costs for seafood businesses. Also this week, Bloomberg reported that Canada’s largest pharmacy chain is partnering with TruTrace Technologies Inc. to use blockchain as a way of tracking the source of cannabis to give patients and their doctors more comfort in prescribing cannabis treatments.

Blockchains may also help Austria meet its 2050 zero-emission and carbon-neutral goals. In Graz, Austria, Power Ledger is partnering with one of Austria’s energy utility companies to see whether they can use blockchains to sell excess energy produced by rooftop solar panels to neighboring homes. According to Power Ledger, users selling excess renewable energy on their platform can keep their identity anonymous under the definition of the General Data Privacy Regulation (GDPR). (You can read more about blockchain and GDPR here.)

Another recent blockchain pilot is taking place in the life insurance industry. According to a recent press release, in Singapore, a media company is teaming with life insurance companies to leverage blockchain to connect, upon consent, those who have recently lost loved ones to potential life insurance policy claims after detecting obituaries reporting the decedent’s death.

New data suggests that blockchain applications are expected to increase. According to a report by BIS Research, the compound annual growth rate (CAGR) for blockchain in the aerospace and aviation industries is projected to be approximately 60 percent over the next decade. The report cites to transparency, reduction of the risk of fraud and reduction in costs as major factors contributing to this growth. BIS Research also pointed to factors that may hinder this growth, including the lack of awareness, regulatory framework, and infrastructure of blockchain technology in the aerospace and aviation industries. Separately, a survey by Wither & Rogers of patents filed in 2016 and 2017 found that blockchain outpaced other emerging technologies in the number of patents filed, and even surpassed the number of patents related to quantum computing.

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U.S. Enforcement Actions Target Cryptocurrency Fraud Schemes and Darknet Markets

This week, the U.S. Department of Justice unsealed a criminal complaint alleging money laundering and fraud against Swedish citizen Roger Nils-Jonas Karlsson and his company. According to the complaint, Karlsson used websites to trick potential investors into sending him cryptocurrency payments that ultimately totaled about $11 million. The individuals thought they were purchasing shares in investment companies, but in reality, the cryptocurrency funds were converted to fiat, transferred to Karlsson’s bank account and later used to buy real estate in Thailand. Karlsson was arrested on June 18 in Thailand; the U.S. is seeking his extradition.

Also this week, the Commodity Futures Trading Commission (CFTC) filed an action in New York against a purported bitcoin company and its principal, Benjamin Reynolds, from the United Kingdom. Defendants purportedly used a website and social media sites to induce customers to purchase bitcoin and then transfer it to the defendants, who said that expert traders would then invest it. But those investments were never made. Instead, the defendants used single-use cryptocurrency wallet addresses to receive their victims’ bitcoin, transferred it into pooled wallets to conceal the illegal origin and kept the funds for their own use. An elaborate pyramid scheme was used to further hide the fraud. According to the CFTC press release, at least 22,858 bitcoin (worth about $147 million at the time) were stolen from more than 1,000 customers.

Last week in Boston, the U.S. Attorney’s Office indicted three men for conspiring to manufacture and distribute controlled substances. The individuals allegedly advertised the substances on a darknet website called “EastSideHigh.” Authorities confiscated nearly 30 kilograms of drugs from the defendants, in addition to $100,000 in cash and $200,000 worth of bitcoin. To help combat these types of cybercrimes, over 300 cryptocurrency experts from law enforcement and businesses convened last week in the Netherlands at the sixth Cryptocurrency Conference – an event designed to forge a closer relationship between the public and private sectors to reduce cybercrime. Participants shared best practices, and Europol announced a new virtual game to help train authorities in cryptocurrency recovery.

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Details Emerge on QuadrigaCX Fraud and Recent Cryptocurrency Exchange Hacks

According to a recent report from a global professional services firm, Canadian cryptocurrency exchange QuadrigaCX’s late founder/CEO transferred roughly $200 million USD in cryptocurrency out of customer accounts and into his personal accounts on competitor exchanges. The funds were reportedly used to furnish the late founder’s luxury travel, real estate investments and trading habits. The late founder also allegedly created fake accounts on QuadrigaCX, credited them with nonexistent fiat amounts and used the nonexistent fiat to purchase actual cryptocurrency from customers. The report also detailed QuadrigaCX’s deficient accounting practices and failure to maintain a contingency plan for the loss of funds or its founder. The global professional services firm serves as the court-appointed monitor and trustee for QuadrigaCX’s bankruptcy estate, which consists of roughly $24.5 million assets to cover $190 million in liabilities. Both the FBI and Canadian authorities are looking into QuadrigaCX’s losses.

Earlier this week, a report identified the “Mokes” and “Netwire” viruses as responsible for Coincheck’s industry record-breaking hack involving $534 million worth of NEM. Initial reports alleged that the hack was orchestrated by North Korean attackers. Both viruses enable hackers to operate infected PCs remotely – Morks first emerged on a Russian forum in June 2011, while Netwire emerged roughly 12 years ago and is well known to cybersecurity investigators.

Late last week, Coinfirm reported movement of $6 million USD worth of cryptocurrency funds stolen from Binance in May. According to Binance, the stolen funds constitute roughly 2% of total BTC holdings on the exchange. Coinfirm also noted that the cryptocurrency funds exhibit a pattern of “hops” and “shedding” that may indicate efforts to launder the funds. Also last week, defense experts discovered a new potential threat from the Outlaw Hacking Group. The hacking group’s malware consists of a Perl-based backdoor component that allows cybercriminals to launch distributed denial-of-service (DDoS) attacks and ultimately monetize their malware through mining cryptocurrency and offering DDoS-for-hire services. Users are advised to close unused ports and to secure ports that are regularly open for system administrators’ support.

To read more about the topics covered in this week’s post, see the following: