The U.S. Securities and Exchange Commission (SEC) is once again poised to approve or reject a bitcoin exchange-traded fund (ETF), when Wilshire Phoenixs United States Bitcoin and Treasury Investment Trust meets a filing deadline Wednesday.

Wilshire Phoenix is the latest in a long line of companies hoping to secure SEC approval to list shares of a bitcoin-related ETF, and the only one that has an active application before the securities regulator. Such an instrument would allow retail investors to get exposure to the bitcoin market without what some see as the added difficulty of owning bitcoin itself, potentially boosting market participation by individuals wary of bitcoins stance as an unregulated investment.

While its chances are slim the SEC has yet to approve any bitcoin ETF applications for a multitude of stated reasons the company was filing updates to its proposal as recently as last week in efforts to bolster its application.

Wilshire managing partner William Herrmann told CoinDesk that he was optimistic about the filing, saying in a phone call last week that we wouldn't have filed it if we didn't think that it would be approved.

To boost its chances, the amended S-1 filed on Feb. 14 now includes an entire additional section on underwriters, though no specific entities are named. The filing also now includes Wilshire Phoenixs maximum share price ($2,500), a number of shares it intends to register initially (8,040) (though this number is likely to change when the actual shares are being offered) and a note on the trust's fees (68 basis points).

The firm filed the ETF application in mid-2019, with the regulator repeatedly postponing any decision, leading to the final Feb. 26 deadline.

In rejecting ETFs previously, the SEC has pointed to concerns about market manipulation, the bitcoin markets overall size and a need for surveillance-sharing agreements as some factors it considers.

Wilshire is attempting to address these concerns by composing its ETF with a basket that automatically rebalances itself between U.S. Treasury bonds and bitcoin in response to the cryptocurrencys volatility. As volatility goes up, the basket favors bonds, and vice versa.

Herrmann previously told CoinDesk that in his view, this automatic rebalancing reduces the risk to investors.

The SEC certainly appears to be paying attention to the filing. According to public documents, Commissioners Hester Peirce and Allison Herren Lee both met with representatives from Wilshire Phoenix, NYSE Arca and their law firms.

The Division of Trading and Markets met with representatives from the companies in January, as well as twice last year, to discuss the proposal. Still, the SECs thinking on the proposal remains opaque.

Wilshires Herrmann, reiterating a point often brought up in favor of bitcoin ETFs, told CoinDesk the product would allow a wider group of investors to safely access what is essentially a new asset class.

"We want to provide easy access to strategies that are often only limited to institutions or accredited investors, Herrmann said. Restraining who is able to invest in any product or strategy on the basis of socioeconomic status or for any reason is simply wrong. This leaves many exposed to sudden market volatility followed by likely losses due to lack of diversification.

The bitcoin ETF Wilshire has proposed is actually one in a larger family of such products. The company has also filed to issue a gold and Treasury-backed ETF.

Herrmann said he believes creating multiple investment strategies for consumers is a part of its overall strategy.

"We're confident we will have the bitcoin ETF soon, and the gold ETF won't be far behind. We are aiming to launch a lot more products as well, Herrmann said.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Go here to read the rest:
SEC to Decide the Fate of Another Bitcoin ETF Proposal This Week - CoinDesk - CoinDesk

The Bitcoin bull run to come with the upcoming halving is likely to be the last one that cab be clearly predicted, said crypto mining pool BTC.Tops founder Jiang Zhuoer. The mining pool is the second largest in China.

The Bitcoin tycoon recently took to Weibo (Twitter's equivalent in China) to opine about his prediction of Bitcoins next halving. As the date of the third bitcoin halving draws near, debates regarding when the halving effects kick in and how it will influence price have been intensifying.

Since Bitcoins creation in 2009, its block reward is designed to be halved every 4 years. There have been two halvings, with the first happening on November 28, 2012, and the second on July 9, 2016. The next halving event is estimated to fall on May 12 this year, when mining rewards will get cut in half, to 6.25 BTC per block.

In terms of Bitcoin price performance, the two previous halvings have projected bullish momentum a year before and after the event. Bitcoin bulls strongly believe that bitcoin would also see great gains in price this time, while some others say that history may not predict the future.

In Jiangs view, Bitcoin halving this time will definitely bring in a bull market and it is likely to be the last bull run that can be clearly foreseen on the grounds that:

Some have argued that when there are legal and convenient channels for regular people, Bitcoin will have a huge potential investor base. But there's still a long way for Bitcoin to go to get close to the acceptance of traditional assets such as stocks. So it's hard to predict what will happen.

[This story was originally published in 8BTC.com, and is shared by arrangement with that site. It has been edited to conform with Decrypt's style.]

Original post:
Upcoming Bitcoin bull will be the last one we can predict, claims China mining tycoon - Decrypt

A California judge has given the go-ahead for a $240m lawsuit against AT&T for porting a subscriber's phone number to a hacker, allowing the criminal to steal $24m in cryptocurrency.

Michael Terpin sued the mobile operator back in August 2018, revising his legal challenge a year later to make more specific allegations. This week, a judge dismissed AT&Ts effort to dismiss the case, noting that Terpin had provided sufficient proof that the US telco giant should defend its position in front of a jury.

At the heart of the matter is Terpins phone number. In June 2017, miscreants successfully managed, after no fewer than 11 attempts in AT&T retail stores, to transfer his number to a smartphone controlled by the criminals a so-called SIM jacking attack. The phone was then used to gain access to cryptocurrency accounts, linked to his phone number, to steal an unspecified amount of Bitcoin, and impersonate him on Skype.

Terpin complained to AT&T, and the carrier agreed to put a special system in place where any future changes would require someone to not only provide ID but also supply a special six-digit code that only he and his wife knew.

Despite those additional measures, however, in January 2018, fraudsters were again able to hijack his phone number and, once again, broke into his cryptocurrency accounts, ultimately stealing $24m worth of Bitcoin, he alleged. Terpin is suing AT&T for not following its own agreed security protocol, and he wants punitive damages. AT&T denies it is responsible for any loss.

What was unclear in the original lawsuit was exactly how the hackers had used his hijacked phone number to gain access to his accounts, and thus whether AT&T should be held liable for the theft. AT&T argued the cryptocurrency accounts he used did not have two-factor authentication (2FA) enabled, and so it could not be held responsible.

In his revised complaint, Terpin claimed hackers used his phone number to request a password change and 2FA token to a particular online account, which the thieves then entered and discovered a file that contained login details for his cryptocurrency wallets.

A password reset request to [Mr. Terpins password protected] program or programs which then sent a 2FA message to Mr Terpins telephone number, which was by virtue of the SIM swap in the hackers possession, the complaint reads [PDF].

The judge in his judgment this week noted that: Mr Terpin further alleges that the hackers created new passwords, which allowed them to locate a file with confidential information to access Mr Terpins [cryptocurrency] wallets and/or accounts. Mr Terpin alleges that, as a result, between January 7 and 8, 2018, the hackers stole nearly $24m worth of cryptocurrency from him.

Its not clear what that account was possibly a password manager or a cloud storage archive and Terpins representatives refused our request for more information, though the judge was clear it didnt matter precisely what account was involved, only that AT&Ts actions led directly to the theft.

At this stage, Mr Terpin is not required to reconstruct the precise sequence of the hack, but rather, merely establish a natural and continuous sequence of plausible events connecting the hackers access to his phone number to the theft of his cryptocurrency, the judge ruled.

Critically, the judge decided Terpin had proved his case that there was a special relationship between himself and AT&T necessary for his claim of economic loss to be accepted legally. Terpin pointed to his contract with AT&T, the fact that AT&T had promised to keep his information confidential through the special six-digit PIN, and that by holding AT&T accountable it will require the telco to provide reasonable, reliable, and industry-standard security measures.

Not all his claims were accepted, however: the small print in his AT&T contract that it cannot guarantee that your Personal Information will never be disclosed in a manner inconsistent with Policy helped the company escape a Deceit by Concealment claim. And another was also dismissed with prejudice.

Crucially, however, the size of the possible future reward is up for debate. For punitive damages to be applied taking the case from the $24m he lost to the $240m he is claiming he has to allege that an officer, director, or managing agent of AT&T knew about or ratified the alleged wrongful conduct of which he complains.

Even though Terpin names a specific AT&T employee, Jahmil Smith, and alleges he was bribed by a criminal gang to fabricate information indicating that Mr Terpin visited [an AT&T] store and showed identification, he still has to connect someone higher up to the theft and the failure to use the six-digit code in order to specifically sue for corporate misconduct.

In other words, if it was just one rogue employee, you cant sue the entire organization for additional damages beyond what was lost. The judge has, however, given him 21 days to revise the complaint, and allege a large failure by AT&T to enforce agreed security policies.

Taken overall, the decision to allow the case to move forward is an important one. The judge accepted that AT&T may well be responsible for the money lost by Terpin as a result of it handing over control of his phone number to someone who didnt have the necessary proof of identification.

It will still be a long and difficult route to resolution, however. It remains unclear how exactly the phone number allowed the hackers to get into his accounts and so it is currently impossible to say whether AT&T should bear some responsibility for what subsequently happened.

The case will be worth watching however for several reasons. For one, the use of mobile phones to confirm someones bona fides is increasingly common, and is an area of law that has no clear precedents. And secondly, it could result in significant changes for how mobile networks deal with customer requests and their account security.

With our phones increasingly gateways to so much of our lives, the big question is: are we solely responsible for making sure they are secure, or do the companies that make money from the sale of phones and related data plans also share a degree of responsibility?

Sponsored: Detecting cyber attacks as a small to medium business

Original post:
It's Terpin time: Bloke who was SIM jacked twice by Bitcoin thieves gets green light to sue telco for millions - The Register

Over the past several years, many entities have submitted proposals for regulated Bitcoin (BTC) exchange-traded funds, or ETFs in the United States. So far, the Securities and Exchange Commission, or SEC, has not approved any official Bitcoin ETF product for the mainstream public.

As crypto gains increased trust in the public eye, entities look for opportunities to bring digital assets into the traditional financial world as part of a more formal and regulated approach. As its first major step into crypto, the Chicago Board Options Exchange, or CBOE, and the Chicago Mercantile Exchange, or CME, launched cash-backed Bitcoin futures trading in 2017.

In an effort to offer further crypto-related products, mainstream entities look toward ETFs as a potential option. ETFs are products traded on exchanges that follow the price action of an underlying asset or basket of assets. Some ETFs are backed by cash, and some are backed by the physical assets themselves. Essentially, a crypto ETF would allow people to trade crypto products on traditional stock exchanges.

The situation becomes complicated with regulators, however, as they must ensure safe storage of the assets behind physically-backed ETFs. Asset validity and manipulation also factor into the equation as regulators do not want illegitimate assets and market manipulation controlling the prices on which these ETFs are based.

There are multiple aspects and factors in getting an ETF approved to be traded on a US Based Stock Exchange, Kryptoin CEO Donnie Kim told Cointelegraph. Asset management company Kryptoin filed its Bitcoin ETF proposal with the SEC in October 2019. The firm aims to see its Kryptoin Bitcoin ETF Trust listed on the New York Stock Exchange Arca, or NYSE Arca.

At this moment in time the commission is listening and learning about this new asset class and they are in a holding pattern, partly to understand the consequences of the existing products on the market and partly to look for further guidance under the current political landscape, Kim said.

Since 2018, the SEC has received a bevy of applications for various crypto-related ETFs. At least nine different entities have filed crypto ETF proposals with the commission, including Bitwise Asset Management, VanEck/SolidX and Direxion.

Several proposals have seen delays from the commission. The CBOEs VanEck/SolidX ETF rule change bid faced multiple delays before the exchange pulled the application in January 2019, only to refile again several days later. The exchange once again pulled the proposal in September of the same year.

Other companies have seen their requests denied, as was the case with Bitwises Bitcoin ETF, which faced denial from the governing body in October 2019. More than a year earlier, the SEC also denied several cash-backed crypto ETFs from Direxion, ProShares and Graniteshares.

At the time of their comments to Cointelegraph, Kryptoin, Crescent Crypto and Wilshire Phoenix all still had crypto ETF proposals in play, pending decisions from the SEC. At press time, it still appears as though all three outfits still await SEC decisions.

Our registration statement is still in the review process until such time that the commission chooses to negotiate their way to a solution, Kim said on Jan. 23 regarding Kryptoins single Bitcoin ETF proposal sitting with the SEC. Until then we are simply in the queue.

Crescent Crypto awaits an answer on its initial F-1 form submission with the U.S. regulatory body for its Bitcoin and Ethereum ETF.

Crescent collaborated with USCF to file a registration statement (S-1) for a 33 Act Bitcoin and Ether ETP called the USCF Crescent Crypto Index Fund (NYSE Arca: XBET), Matta detailed on Jan. 27. The filing remains under review and we are evaluating the best course forward.

Wilshire Phoenix also still waits on the commission for a ruling on the institutions crypto ETF. The SEC has indicated a decision will be made by February 26, 2020, Herrmann said.

One of the hurdles facing the SECs approval of a Bitcoin ETF lies within the current regulatory framework around exchanges.

Over the past two years, the SEC has received multiple proposals from the CBOE regarding a rule change that would allow trading of a physically-backed Bitcoin ETF from VanEck/SolidX. VanEck, an investment management company, and SolidX, a software and financial services outfit, collaboratively backed the now-abandoned product.

In his comments to Cointelegraph, Kim noted that U.S. exchanges are the ones that require SEC approval for Bitcoin ETF listing and trading. Once this approval is given, (even though that does not seem likely at this time as the commission is being quite mum about their requirements), the ETF product then needs to be analyzed and discussed to provide a mechanism suitable enough to satisfy another division of the commission, Kim explained.

Kim added:

If one division of the commission is not readily engaging in conversations or not willing to allow the rule change at the exchange level it is ineffective to push forward any application until such clarity arises. Basically, the SEC is a 2-3 headed dragon that needs the cooperation of all heads.

Asset manipulation is another aspect the SEC sees as a potential issue, the governing bodys chairman Jay Clayton expressed in June 2019.

The SEC has made it well known that their primary remaining concern is the manipulation of the bitcoin markets, Crescent Crypto Asset Management co-founder Christopher Matta told Cointelegraph.

Crescent Crypto filed an application with the SEC in May 2019 for an ETF that includes both Bitcoin and Ethereum. The company, in partnership with asset management firm USCF, looks tolist its USCF Crescent Crypto Index Fund (XBET) on the NYSE Arca.

In their denial of other ETPs, the SEC has consistently highlighted their desire to see a regulated market of significant size that includes surveillance sharing agreements to monitor manipulative activities, he added, referring to exchange-traded products.

Matta noted that the governing body sees the crypto scene as lacking the right ingredients in the right proportions. In the SECs view, current crypto exchanges do not satisfy the regulated requirement, while the regulated futures markets do not currently satisfy the significant requirement, he said.

Speaking only about its own crypto ETF, investment banking alternative Wilshire Phoenix said it has not had difficulties with its digital asset ETF proposal.

We have not seen any obstacles in connections to our application, Wilshire Phoenix founder Bill Herrmann told Cointelegraph. We continue to have thoughtful and meaningful discussions with the commission, he added.

Wilshire Phoenix submitted a proposal for a combination Bitcoin and U.S. T-Bill ETF, on July 1, 2019. The firm, in collaboration with the NYSE Arca, then updated the filing in October 2019, tapping Coinbase as the custodian for the product. Wilshire Phoenix aims to see its U.S. Bitcoin and Treasury Investment Trust listed for trading on the NYSE Arca.

Wilshire Phoenix currently waits for the SECs ruling on its crypto ETF, which is slated to occur on Wednesday. Given the massive number of delays and denials the SEC has dished out in recent days, odds would indicate an approval from the commission is not likely just yet.

As the crypto space continues to mature, the SEC likely will approve new products based on digital assets. For the time being though, the commission is up to its ears in applications and information.

If that was not enough to keep the SEC busy, at the end of 2019, the commission also announced an endeavor to research a new format for the age-old U.S. accredited investor rule, which has historically barred many U.S. participants from various activities.

View original post here:
No Bitcoin ETF Yet: A Deep Dive Into the Situation in the US - Cointelegraph

A new German law requires every entity that holds private keys for others (e.g., bitcoin exchanges and/or bitcoin custodians) and that actively addresses the German market must become licensed as early as January 1, 2020. And to address the most common misconception right at the beginning: No, it absolutely not matter where your company is based. What matters is if you are addressing the German market with your services.

The law implementing the amendment to the fourth EU money laundering directive (Federal Law Gazette I of December 19, 2019, p. 2602) included the crypto deposit business as a new financial service in the KWG . Companies that want to provide these services require BaFins permission when the law comes into effect on January 1, 2020. However, the law provides for transitional provisions for companies that have already performed the transactions that are now subject to authorization before they came into force.

Despite the many open questions that are still unresolved, let me start this piece by stating that I am a general supporter of regulation if executed right. And I believe this new law could pave the way for Germany to become the Crypto Heaven of Europe, as especially large financial institutions and investors are in favor of regulated entities. But to also be honest right from the start, this will heavily depend on how regulators finally deal with questions as they arise. Even the best of intentions can still backfire on the German ecosystem if executed poorly. But, I am full of hope that this will not be the case, as the regulators and the industry appear to be working together more and more. And by working with, instead of against, each other, good regulatory decisions seem possible.

Taking everything into account, here are the four things I believe to be the main challenges regarding the new regulations:

There is no clear definition of what actively addressing the German market means; this will be decided on a case-by-case basis. By one possible interpretation, anyone operating a designated German website or offering German marketing material is likely to be actively addressing the German market. But if someone for whatever reason has a growing number of German customers without any official marketing, it could also be concluded you somehow MUST be actively addressing the German market (as otherwise you simply wouldnt be able to gain this many new customers from Germany).

As the French are currently sorting out their regulations as well, it would have been great if both countries would have agreed on potentially passporting their respective licenses, meaning that if you are licensed in Germany, you could also operate in France without applying for a new license (or registering, to be exact). Although we strongly believe that this will come soon, it would have been great to have this agreement right from the start.

For an outsider not familiar with German regulations and law, the means of implementation and the timelines might seem strange (although they are very clever in fact). In short, you are deemed to be a licensed provider as of January 1, 2020, provisionally and retroactively, if you state to the officials that you plan to apply for a license before March 31, 2020, and then hand in your application before November 30, 2020 (yes, it appears to ask you to go back in time). This also means that if you say you are going to apply for a license before March 31, 2020, and then dont hand in your application before November 30, 2020, you are deemed to have been illegal since January 1, 2020.

Furthermore, it also means that if you are conducting your business as you always have, you will most likely be deemed illegal since January 1, 2020. And that is a felony and not a misdemeanor. Although this is the case, some market players really seem to rely on a tactic called reverse solicitation (which means that basically a customer is free to choose whatever supplier he or she wants) and not apply for such a license.

I strongly believe that this is not the best idea, given the massive political implications of this new rule. As weve seen in the past, I would assume that Germanys Federal Financial Supervisory Authority (BaFin) will regulate pretty strictly in this case, as otherwise the new law would simply make no sense and would harm the German economy, which would make little sense from a German point of view.

Big improvements are needed on the communication side, especially regarding the international community as this is an international topic. Up until now, I have seen neither a direct translation of the law nor any advice in English from the regulators. Although this is advantageous for those of us who work in consultancy and advise exchanges and custodians in exactly these matters, this lack of clear communication from regulators is problematic in general.

I sometimes laugh at a very funny cultural thing. Germans are known to have a form and a rule for pretty much everything. And it is true, that is how we are (with all the pros and cons that come with it). So it feels bizarre that, in this instance, it is not the case; hence the need for us to work together with regulators in order to establish proper rules and regulations on the fly.

For example, MPC (multi-party computation) is not addressed in the new law yet; the question of multisignature issues is also still open among a myriad of different other, sometimes very specific issues. This lack of clarity makes a typical German feel pretty uncomfortable, as we are simply not used to that. What we have, at best, is a step-by-step approach with educated guesses and a lot of communication still to come.

Another interesting fact is the way custodians (tech providers) are dealing with these issues. According to a study carried out by Digital Assets Custody (to my knowledge the largest digital assets custodian comparison website on the internet), it seems as if most specialized infrastructure providers for digital assets custody seem to be avoiding regulation like the plague by stating that they would only serve as a tech provider and not as a custodian that needs to be regulated.

While I understand this avoidance approach, as regulation comes with its very own challenges, it seems shortsighted. On the one hand, I believe that regulation will ultimately evolve, concentrating on exchanges as a first step, but then they will come to focus on custodial services.

Depending on each entitys respective tech stack and business model, it seems possible to me that not only the exchange but also the custodian will ultimately be deemed regulated entities. So it is basically just a matter of time before the regulators come knocking. And as seen in the past, its usually a good idea to be ahead of the game.

It is interesting to see that the new law around custodianship functions as kind of a wake-up call for the industry, although the respective players should have been alert in regards to Germany beforehand. This goes back to the view of the BaFin that judged Bitcoin as a so-called Unit of Account, making it a financial instrument; therefore, everybody dealing with these financial instruments should already have the proper licenses. This means that if you were to operate a bitcoin exchange you would depending on the business model need a license as a multilateral trading facility, for example. The Berlin Court of Appeal expressed a different view of this in a court case, resulting in some confusion here.

With the introduction of the newly created term Krytowerte (direct translation would be crypto values), it is now clear that bitcoin is indeed considered to be a financial instrument and that every entity dealing with it will have to be regulated in the same manner as firms dealing with any other financial instruments.

As the respective licenses are subject to the specifics of the business model, it is hard to give some general information about what is needed. The custodian licensing will most likely require two fit and proper managing directors, 125,000 ($136,000) in starting capital plus setup costs of around 250,000350,000 ($272,000$380,000) and recurring yearly costs of 350,000 ($380,000). (These are rough estimations and can vary widely depending on your business model and various costs.)

All in all, the new law makes operating a digital assets business harder. But on the flipside, it also brings some degree of clarity and security to the people who interact with providers in the digital asset space.

Will everybody be happy with this new direction? No. But its a start.

This is an op ed by Dr. Sven Hildebrandt. Views expressed are his own and do not necessarily reflect those of Bitcoin Magazine or BTC Inc.

See the original post:
How the Latest German Regulations Target Bitcoin Exchanges and... - Bitcoin Magazine