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The Turkish government has announced plans to establish a national blockchain infrastructure to utilize distributed ledger technology (DLT) in public administration.

The Ministry of Industry and Technology set out its vision during its Strategy 2023 presentation on Sept. 18 in Ankara.

Strategy 2023 emphasizes blockchain and DLT as priorities for the coming year. The document refers to a Startup Genome survey that marks blockchain as one of the fastest-growing tech trends, with a 101.5% increase in early stage startup funding globally.

Regulatory sandbox for blockchain is coming

The Strategy 2023 document says a new open-source platform for blockchain will be established in Turkey. This initiative will analyze different use cases such as land registration, academic certificates and customs to determine potential public sector applications.

The Ministry of Industry and Technology is also planning to work with Turkish regulators to create a regulatory sandbox for blockchain applications.

Turkish government uses the B-word

As Cointelegraph Turkish reported today, Strategy 2023 is the first ministry-level document in Turkey to include the word “Bitcoin” (BTC) as a reference. Turkey released an economic roadmap in July that describes a central bank-issued digital currency, but did not mention Bitcoin or any other cryptocurrency. Strategy 2023 also provides this definition of blockchain technology:

“Blockchain, which became popular with virtual currencies like Bitcoin, delivers a distributed communication infrastructure to provide trust between parties on transactions without the need for a central authority. This feature enables many different use cases that address transparency and reliability issues, from smart contracts to supply chains. Because it removes any intermediaries, blockchain technology builds new business models that will shape the future.”

Turkish institutions have been embracing blockchain technology in various spheres. In August, the Istanbul Blockchain and Innovation Center (BlockchainIST Center) was inaugurated at Bahçeşehir University. The center’s director, Bora Erdamar, said BlockchainIST will be “the most important center of research and development and innovation in Turkey in which scientific studies and publications are made in blockchain technologies.”

Earlier this month, Turkey’s Istanbul Clearing, Settlement and Custody Bank (Takasbank) announced a blockchain-based platform for trading physical gold. Takasbank’s new project aims to enable users to transfer physical gold stored at the Borsa Istanbul Stock Exchange.

The President of the Republic of the Marshall Islands Hilda Heine has narrowly survived a no confidence vote that was partly prompted by her plans to introduce a national digital currency, Asia-focused English-language publication Nikkei Asian Review reports Nov. 12.

The Marshallese parliament was reportedly split 16-16, just one vote short of the number needed to prompt Heine to resign the office of president.

The country’s parliament had initially backed the creation of a national digital currency, called the Sovereign (SOV), in February of this year, to be distributed and used along with the U.S. dollar, the country’s mainstream currency.

However, as Nikkei notes, the president’s critics had accused the proposed plan for a state-backed cryptocurrency of “tarnishing” the country’s reputation. Alongside eight dissenting senators, former president Casten Nemra was another vocal detractor of the Sovereign.

Nemra reportedly stoked political divisions over the government’s alleged failure to investigate investigate the loss of $1 billion from the Marshall Islands Trust Fund, which set up by the U.S. to compensate Marshallese citizens affected by nuclear tests conducted near the country.

Political tensions were further strained over a Chinese plan to turn the Marshallese atoll of Rongelap into a special administrative zone including a tax-free port and offshore company registration. Several of the senators who introduced the no confidence vote support the plan, while Heine sees the move as a Chinese incursion on Marshallese sovereignty.

Heine is reported to have told the parliament, also known as the Nitijela, that the attempt to overthrow her was a “referendum about our own politics.” She has also hailed plans for the Sovereign as a “historic moment for our people.”

As both Nikkei and major Israeli newspaper Haaretz report, the Marshallese government’s pursuit of a state-backed cryptocurrency was precipitated by a partnership with Israeli startup Neema, which is said to have persuaded the country’s politicians that the project could bring $30 million, of which half would go to Neema.

According to Haaretz, one of Neema’s owners, Barak Ben-Ezer, wrote this spring that “as a practical matter, SOV […] becomes real money from a legal standpoint […] without capital gains tax, without a securities regulator claiming that the currency is stock. SOV is a sovereign currency like the dollar, the euro and the yen.”

Nikkei today reports that Finance Minister Brenson Wase has declared the government will move forward with the Sovereign, and is waiting to fulfil requirements from the International Monetary Fund (IMF), the U.S. and Europe.

As previously reported, this September, the IMF warned the Marshallese government of the risks of adopting a cryptocurrency as a second legal tender, stating that “the potential benefits from revenue gains appear considerably smaller than the potential costs.” It further warned of potential reputational damage, compromised relationships with foreign banks, and risks of money laundering and terrorist financing.

This post credited to cointelegraph  Image source: Cointelegraph

The US National Institute of Standards and Technology (NIST) and other government bodies play a role in Bitcoin and other cryptocurrencies.

For starters, SHA-256 and most other hashing algorithms using in cryptocurrencies have been reviewed and tested by the Institute in the past. Independent cryptographers are frequently consulted by government agencies and scientists. The NSA and NIST occasionally conduct competitions for the development of new cryptographic software. The most recent winner was an algorithm called Keccak, but it is now most often referred to as SHA-3. The majority of hash functions that are submitted to these competitions see use, often wide use, regardless if they win or not.

While the world’s most famous cryptographers work in the private sector, it is fair to say that NSA and other government agencies provide decent career opportunities for up-and-coming cryptographers.

NIST Publishes Paper Suggesting Managed Blockchain with Transparency

Peter Mell of NIST wrote a paper in recent times entitled “Managed  Blockchain Based Cryptocurrencies with Consensus  Enforced Rules and Transparency.” The gist of the paper is that there is a happy medium between public, wild blockchains like Bitcoin, which follow the laws of consensus and little else, and managed blockchains which give their permissioned owners an untrustworthy amount of paper.

We demonstrate how to implement our approach through modest modifcations to the implicit Bitcoin specifcation, however, our approach can be applied to most any blockchain based cryptocurrency using a variety of consensus methods.

The implications are obvious: the blockchain could potentially be used by the government to issue its own cryptocurrency. A strictly public mining network and blockchain would obviously fail the means test for the government, for multiple reasons including the potential of a 51% attack launched by an unfriendly government. According to the paper, the features which make the Bitcoin protocol attractive to the government are its transparency and, of course, the inability to lose funds on it.

“We provide a novel cryptocurrency architecture which is a hybrid approach where a managed cryptocurrency is maintained through distributed open consensus-based methods. Key to this architecture is the idea of a genesis transaction upon which all other transactions are based and which enables the establishment of a hierarchy of accounts with differing roles It is these roles that enabled us to introduce features from fiat currencies into a cryptocurrency: law enforcement, central banking, and account management,” an excerpt from the paper explains.

“Another novel feature is that the architecture allows the cryptocurrency policy to be maintained dynamically by the currency administrator, but certain policy settings can be made permanent in order to facilitate confidence in the stability of the system. This is especially important for the relationship between the currency administrator and an independent community of miners,” it added.

Democracy is meant to be transparent, and government agencies are supposed to be accountable to the people who elect and pay for them. Current technologies in place don’t always provide for this and there are plenty of opportunities for fraud, waste, and abuse in the government sector.

The NIST version of the Bitcoin system makes only minor changes to the structure of a Bitcoin transaction in order to allow for the introduction of administrator policies. “Roles” are introduced into Bitcoin transactions, enabling changes to be made in the protocol as a whole. The paper explains that they are using the existing design which enables the spending of coins to additionally “spend roles.” Without getting too technical, it enables the manager of the blockchain to have a great degree of control over the entire pool of money in the system.

The  vin[] field operates  similarly as before. In  Bitcoin, a vin[] field specifies a set of coins from a particular transaction already posted on the blockchain.[…] However,  the vin[] field can also be used to bring roles into a transaction to authorize activities that require roles (which is most any activity in our architecture, depending upon the  specific policy enacted). Functionally, it is like we are ‘spending’ a role to use it to authorize some action given the usual use of a vin[] field (but roles can be ‘spent’  an infinite number of times and are not transferred like coin). A vin[] field can  specify a former transaction where an account was given a role.

Importantly, the design mentions an “independent community of miners.” Several aspects of the idea would require rigorous testing before ever seeing any real-world use – one example that comes to mind is the US Treasury’s blacklist and range of countries US Government and most US citizens cannot do business with. These people would have to be banished from both mining and the possession or use of “USCoin” in order for such a project to be in compliance with US laws.

NIST Tests Ideas on Own Bitcoin Fork

In addition to this paper, NIST has quietly maintained a fork of the Bitcoin software which attempts to integrate the ideas presented in the paper. Presumably the software has only been run in government labs, but it could inadvertently provide a boost to countries like Sweden which are actively working toward developing their own nationalized cryptocurrencies.

The prospects of a government-backed cryptocurrency in the US are likely years away, but certainly folks within the system have floated the idea multiple times. Government use of blockchain is on the rise, and the arc of history likely points toward cryptocurrencies being at the heart of all financial systems, but only time will tell what shape they will actually take. Aside from operating their own blockchain, governments could simply issue tokens on existing blockchains which follow the rules they decide to put in place. The options are myriad, but one thing is for sure: traditional, fiat-backed currencies are inferior to transparent and modernized digital currencies and will eventually have to be updated.

This post credited to ccn Image from Shutterstock.

Reuters reports that Mastercard has formally complained to the US government that the Indian government is deliberately promoting domestic payment networks over international ones like Mastercard and that the Prime Minister, Narendra Modi, has actively used nationalism in promotion of payment processing network RuPay.

According to the report, Mastercard and Visa are not the dominant payment modes in India – at least half of the country’s payment cards use the RuPay network.

Modi has likened the use of RuPay to public service because the transaction fees stay inside the country.

The complaint was in the form of a note to the Office of the United States Trade Representative from Sahra English, who serves as the company’s Vice President for Global Public Policy. It read, in part:

“Increasing rhetoric from the prime minister and government mandates on promotion and preference for RuPay […] continues to create market access issues for U.S. payments technology companies. The Indian government’s preferential treatment of RuPay coupled with fallacies on pricing must be discontinued.”

The move, in Mastercard’s view, will hopefully stimulate some form of action on the part of the US government. It is coupled with other pro-domestic moves on the part of the Indian government which are meant to increase local revenues, such as forcing foreign technology companies to store more data locally, which stimulates local data storage revenues.

Indian Government Seemingly Against Any Outside Payment Rails

Mastercard and other traditional payment processors are not the only payment providers to be the subject of government interference and/or disparaging. Crypto tokens are formally on the chopping block in the country, and the operator of a non-functioning Bitcoin ATM was recently arrested.

Trading has largely halted in India as a result of a ban in placesurrounding the practice. Indian Bitcoiners may find themselves in a similar situation as those in China, where theycan possess coins but not use them for much, although progress is being made on that front and it appears Chinese merchants can also accept Bitcoin. The trouble with local regulations is that they can often be confusing and widely vary from jurisdiction to jurisdiction.

India comprises almost a fifth of the global population and many of its residents live in the sort of poverty that cryptoassets, given the opportunity, can help alleviate. The question of how much such opportunity India will have remains to be answered, but to date it doesn’t look good.

This post credited to ccn Featured image from Shutterstock.

While delivering her keynote at the 2018 Korea Blockchain Expo, chairperson of The National Assembly Special Committee, Lee Hye-hoon, said the blanket Initial Coin Offering (ICO) ban will be lifted in the “near future”.

Even if this is tentative, odds are South Korea will legalize the controversial fund-raising model as early as November 2018 when government representatives meet to decide on the matter “based on results of the investigation by end of October” according to the head of Government Policy Coordination, Hong Nam-ki, as reported in local media.

The Effect of Korea’s September 2017 ICO Ban

As blockchain technology takes center stage, South Koreans continue to embrace and invest in digital assets. As such, they are one of the few crypto bright spots with high adoption rates. Even though the excitement around cryptocurrencies and digital asset investment is palpable, government officials are still cautious. Before implementing a market wide ICO ban back in September 2017, it had warned that the speculative mania around Bitcoin and similar cryptocurrencies was dangerous if investment or trading is done without due diligence.

However, the stateless status of digital assets is appealing and despite intervening measures, like mandating exchanges to implement KYC rules as the government crackdown on money laundering and other illegal activities, South Koreans are avid international investors of blockchain related startups. Besides, because the law doesn’t restrict South Koreans to buying coins or tokens, huge trading volumes continue to churn out from South Korea’s exchanges as Coinone, Bithumb and UpBit. These are three of the world’s largest cryptocurrency exchanges, currently planning to set shop in other crypto friendly states as Singapore and Thailand.

It is this potential loss of business as exchanges and blockchain startups migrate and crowd-fund in other jurisdictions that is causing policy makers to shift their position and campaign for the reversal of September 2017 ban of ICO under new set of conditions that all coin issuing projects crowd fund but comply with tight investor protection requirements.

The Legalization Drive

The group of 10 legislators led by Hong Eui-rak, who is also the member of the ruling Democratic Party of Korea, is pushing for a new proposal allowing public research organizations and centers to issue tokens under the tight supervision of the Financial Services Commission (FSC) and the Ministry of Science and ICT. But Choi Jong-koo, the chairman of South Korea’s FSC, is doubtful about cryptocurrencies and coin offerings. On October 11 during the parliamentary audit session of the FSC he said:

“The government does not deny the potential of the blockchain industry. But I think we should not equate the cryptocurrency trading business with the blockchain industry.”

He further emphasized his point saying:

“Many people say the Korean government should allow ICOs, but ICOs bring uncertainty and the damage they can cause is too serious and obvious. For these reasons, many foreign countries ban ICOs or are conservative towards them”

Regardless, the relentless drive by lawmakers is gaining traction and comments from Lee Hye-hoon asserts the general feel around the need to reverse the ban as the Special Committee, which she heads, responds to accusations that they are not doing enough to nurture and promote the development of the nascent blockchain technology in the country.

This post credited to News BTC  Image source: News BTC

Much noise has been made about the untraceable qualities of Bitcoin and other cryptocurrencies. Bitcoin “can be used to buy merchandise anonymously” said early primers on crypto, it offers users the kind of financial privacy that was previously available only from a “Swiss bank account,” say more recent commentators. And given its ability to provide people with a layer of anonymity and privacy, it has been smeared by politicians, experts and mainstream journalists alike as a hiding place for almost any hacker, drug dealer, gang member, terrorist or despot you could possibly name (even if cash is still the preferred financial medium of such personae non gratae).

It’s therefore no wonder that, for several years, governments have been feverishly trying to trace Bitcoin’s circulation, as well as that of other digital currencies. And despite the popular reputation of most cryptocurrencies as anonymous, they’ve been aided in this pursuit by the fact that most cryptos are not anonymous, but rather pseudonymous. In other words, by linking transactions to fixed wallet addresses, and by keeping a public record of every single transaction ever made on their chains, most popular cryptocurrencies provide national governments with an almost perfect means of keeping tabs on our financial activity.

However, while many governments have begun capitalizing on this very convenient affordance by building systems that compile transaction data and scraped private info into a single database, most have only just begun moving in this direction. And more importantly, there are a number of privacy coins – Monero being the most prominent  – that don’t offer a public record linking transactions to wallets, while there are also mixing tools for making the transactions of non-privacy coins private. As such, there are still ways to remain anonymous in crypto for those who want to keep a low profile, despite the best efforts of governments in the USRussiaJapan, and elsewhere.

Japan and Russia

Japan and Russia

As the most recent example of government crypto monitoring, the Japanese National Police Agency (NPA) announced plans to implement a system that can reportedly “track” cryptocurrency transactions within Japan. While specific technical details are scarce, the software is being developed by an unnamed private company and will cost the NPA around $315,000 next year to run. In particular, its main function will be to trace transactions reported to it as ‘suspicious’, linking them together into a visualization that will, in theory, enable it to pinpoint the sources and destinations of illicit money.

For the most part, it will receive its reports of suspicious activity from Japanese crypto-exchanges, which ever since the May introduction (by the Financial Services Agency) of anti-money laundering (AML) legislation have been sending it intelligence on potentially illegal transactions and the accounts associated with them. Indeed, this reporting is precisely what makes a ‘transaction-tracking system’ possible, rather than the invention of some novel cryptographic technology capable of breaking through the pseudonymity/anonymity of most cryptocurrencies. Simply, exchanges are being legally required to follow strict know-your-customer (KYC) policies, which enable them to link real-world identities to addresses and to transactions recorded on public blockchains. And given that they’re supplying this info to the NPA, all the NPA will really be doing with their system is feeding such info into a database and creating visualizations of the flow of crypto.

What this means is that such a system isn’t likely to have much direct application to anyone who circumvents (regulated) exchanges when receiving and sending crypto. That said, even if certain users stay away from Japanese exchanges they could still be linked to illicit crypto if said crypto has passed through an exchange and already raised suspicions. Either way, another area to which the system isn’t likely to have much direct application are privacy-enabling coins such as MoneroZcash and Dash, since rather than attempting to track such coins the Japanese authorities have merely decided to ban exchanges from carrying them.

A similar story is currently emerging in Russia, where the Federal Financial Monitoring Service (Rosfinmonitoring) has contracted for a system that will collate various sources of information regarding suspects in finance-related crimes. As reported by the BBC Russia service, the system will be used to create profiles for suspects, to which the authorities then add whatever relevant info they can gleam about him or her: phone numbers, bank card details, physical addresses, and crypto wallet addresses. Once again, the system hasn’t been designed specifically to compromise the cryptography of Bitcoin or any other crypto, but rather seeks to simply add wallet information – where available – to any other data Rosfinmonitoring has on a suspect.

By doing this, the Russian authorities clearly hope to prevent suspects from laundering any illicitly gained money via crypto, while they also assert that they intend to stop crypto being used directly for illegal purposes. “Because of their anonymity and the inability to trace them,” German Klimenko – an ex-advisor to Vladimir Putin on internet development (and head of the cryptocurrency group at the Russian Chamber of Commerce and Industry) – told the BBC. “Cryptocurrency is used in grey areas, in the dark web, for buying weapons, drugs, or violent videos. Lawmakers of many countries are wary of this phenomenon: this was confirmed by the analysis that we conducted under orders from the president [Putin].”

While Russia hasn’t introduced regulations requiring exchanges to uphold strict AML and KYC policies, the State Duma is in the process of negotiating a digital assets bill that would do just that. And once this bill has passed, Russian authorities will – like their Japanese counterparts – have access to info on the identities of wallet holders. As a result, the Rosfinmonitoring service will be able to enter this information in the soon-to-be-launched system (coming at the end of 2018), which will enable it to link transactions, wallets, and identities together.

But because this system will be tapping into crypto-exchange records rather than novel ‘crypto-hacking’ technology, it’s likely that it won’t apply to all cryptocurrencies and all cryptocurrency users. Some experts even believe that it will have a largely counterproductive effect, forcing many cryptocurrencies and their users to become more untraceable.

“If you look at the entire volume of laundered funds, the share that is laundered through cryptocurrency is very small,” Anton Merkurov – an advisor with US-based the Free Russia Foundation – said. “Let’s say the turnover of the local exchange is about one billion rubles [around $14.7 million] a week. This, in fact, is not very much. Instead of catching the proverbial Colonel Zakharchenko [a former anti-corruption officer who was caught with around $140 million in bribe money in 2016], authorities are trying to find a microbe under a microscope in a drop of water. This should not be a priority. And most importantly, start pressing there and opposition will begin, you will think up real tools for laundering.”

The United States

The United States

While the systems being rolled out by Japan and Russia largely depend on cooperation from crypto-exchanges and on piecing together disparate sources of information, there are indications that some governments at least have taken a more direct approach to identifying crypto users.

The US, to take the most notable – and disconcerting – example, has developed a covert piece of technology that can actually extract raw internet data from fiber-optic cables in order to identify the IP addresses and IDs of those sending and receiving Bitcoin. According to documents obtained by whistleblower Edward Snowden in 2013 and published by the Intercept in March 2018, the technology in question is a program developed by the National Security Agency (NSA) and known as OAKSTAR. Masquerading as a piece of virtual private network (VPN) and downloaded by some 16,000 users in such nations as China and Iran, the program instead siphons data from an “unspecified ‘foreign’ fiber cable site,” according to the Intercept.

Using this data, the NSA can then extract such information from Bitcoin users as their password information, their internet browsing activity, and their MAC address, while certain whistle-blown docs also discuss extracting users’ internet addresses, timestamps, and network ports. Effectively, OAKSTAR can be used to gather much more than the information necessary to identify someone and link them to specific Bitcoin addresses and transactions, and it can do so without having to rely on crypto-exchanges.

This is a big blow for Bitcoin privacy. As Cornell University professor Emin Gün Sirer told the Intercept:

“People who are privacy conscious will switch to privacy-oriented coins […] when the adversary model involves the NSA, the pseudonymity disappears. You should really lower your expectations of privacy on this network.”

Similarly, Matthew Green – an assistant prof. at Johns Hopkins University Information Security Institute (and a key Zcash developer) – explained to the Intercept that the NSA’s exploits are “bad news for privacy, because it means that in addition to the really hard problem of making [crypto] transactions private […] you also have to make sure all the network connections [are private].”

As alarming as OAKSTAR and the activity surrounding it are, no new information has emerged recently to indicate that the NSA has extended its Bitcoin-tracking endeavors to other cryptocurrencies. There’s also the fact that its ability to link certain people with Bitcoin wallets is predicated on these people unwittingly downloading a piece of software that secretly extracts their internet data (while purporting to provide some other service). As a result, if users stick to VPN packages (and other pieces of software) they know and trust, it’s likely they will avoid the NSA’s long claws.

This reassurance aside, there is still the predictable reality that the United States government has been seeking user data from cryptocurrency exchanges, and has been doing so for longer than either the Japanese or Russian governments. In November 2016, for instance, it filed a legal summons that required Coinbase to provide the Inland Revenue Service (IRS) with the identities of an unspecified number of individuals associated with a number of cryptocurrency wallets. As Cointelegraph reported at the time, this summons was significant not so much in itself, but because it indicated that the IRS had been able to track certain wallets to an extent sufficient to determine that they’d been involved in the violation of tax legislation. Similarly, it also indicated that the IRS had been able to determine that the wallets were attached to Coinbase.

While the IRS unsurprisingly hasn’t divulged how it was able to track these wallets, a 2015 document leaked to the Daily Beast in 2017 revealed that it awarded a contract to Chainalysis, a Switzerland-based “blockchain intelligence” provider that monitors cryptocurrencies such as Bitcoin for compliance reasons. As Cointelegraph reported at the time, Chainalysis uses “data scraped from public forums, leaked data sources including dark web, exchange deposits and withdrawals to tag and identify transactions.” It attempts to combine what’s made publicly available on blockchains with personal info unthinkingly/carelessly left by crypto users on the web. It runs, therefore, another system that is less about cryptographically penetrating blockchains and more about simply putting together all the disparate threads of info strewn across the Internet.

And even though the IRS hasn’t explicitly acknowledged its employment of Chainalysis or any other service, it’s also interesting to note that past instances where an agency of the federal US government has succeeded in tracking crypto users have potentially involved input from the NSA. In October 2013, Ross Ulbricht was arrested by FBI agents in San Francisco and then charged (almost a year later) with conspiracy to traffic narcotics, money laundering, and computer hacking. During his trial, he claimed his prosecution violated the fourth amendment (i.e. right to protection against unwarranted searches), since the only way the FBI could have identified him was through the illegal help of the NSA and its data-gathering trickery. Needless to say, this defense didn’t exactly work, yet the Intercept noted that the NSA’s OAKSTAR project got under way six months before Ulbricht was arrested. More interestingly, the website also published classified documents in November 2017 revealing that the NSA had secretly helped the FBI secure other convictions in the past.

Whatever the truth behind Ulbricht’s conviction, it’s clear that the NSA has had the ability to covertly identify Bitcoin users for over five years, while it’s also true that other US agencies have been tracking crypto transactions (using undisclosed means). As such, it’s a safe bet to say that American crypto users should probably think carefully before engaging in anything Uncle Sam wouldn’t condone.

China, India and beyond

China and India

It would appear that few nations can match the US in the reach and power of their crypto-tracking activities. However, this isn’t stopping many from trying. In China, reports emerged in March that the Public Information Network Security Supervision (PINSS) agency has been monitoring foreign crypto-exchanges that serve Chinese customers. Even though the government has banned domestic exchanges and trading on foreign alternatives, this hasn’t stopped every Chinese trader from seeking out crypto abroad. Because of this, PINSS has been ‘monitoring’ foreign exchanges so as to “prevent illegal money laundering, pyramid schemes [and] fraud,” according to Chinese news outlet Yicai.

While Yicai could confirm via sources at PINSS that such monitoring had been underways since September 2017, it couldn’t explain just what kind of monitoring was being pursued, or whether the Chinese government was actively trying to identify individuals trading in crypto. Still, whatever the extent of the surveillance involved, the knowledge that other nations are tracking crypto would indicate that Chinese traders should also add themselves to the growing list of ‘people who ought to be careful.’

So too should Indian traders, who in January may or may not have learned that their government was keeping tabs on them for tax purposes. Actually, chances are they would have learned about this, since the Indian tax department sent notices to “tens of thousands” of investors (according to Reuters), after having conducted national surveys and having obtained user data from nine Indian exchanges. This provided a clear signal that the government was indeed tracking cryptocurrency transactions, something which it had begun contemplating in July 2017, when India’s Supreme Court demanded information from it and the Reserve Bank of India on the steps being taken to ensure that crypto isn’t being used for illicit purposes.

As reported in July by Indian news website LiveMint, the system the government was considering, would involve cooperation between the central bank, the Securities and Exchange Board of India (SEBI), and India’s intelligence agencies. However, as the involvement of India’s crypto-exchanges in January’s tax notices reveals, it’s once again likely that the system currently rests on input from these exchanges, rather than on technology comparable to the NSA’s, for instance.

Other than the prominent examples of Japan, Russian, the US, China and India, there are few other cases of national governments going public with (or being known for) crypto-tracking systems. Nonetheless, even if there’s currently no public record of other governments investigating the potential for tracking systems, it’s highly probable that those governments with a significant interest in crypto have contemplated a tracking system in one form or another.

UK and EU

For example, the UK and EU governments jointly announced in December 2017 that they’re planning a “crackdown” on crypto-enabled money laundering and tax evasion. UK economic secretary to the Treasury Stephen Barclay said in last October:

“The UK government is currently negotiating amendments to the anti-money-laundering directive that will bring virtual currency exchange platforms and custodian wallet providers into anti-money laundering and counter-terrorist financing regulation, which will result in these firms’ activities being overseen by national competent authorities for these areas.”

While this doesn’t confirm tracking, it would at least imply it, since the ability to enforce AML legislation entails that governmental bodies and departments should have some means of not only detecting when someone is earning crypto that needs to be taxed, but also determining just who that person is. Hence, UK and EU authorities need to have some kind of tracking system in place, otherwise their threats of ‘cracking down’ on money laundering and the like will equate to only so much hot air.

And in the future, it may become increasingly possible for them or any other government, regardless of technological development, to carry through with such threats. In April, a corporate giant none other than Amazon, received a patent for a “streaming data marketplace” that would permit the combining of multiple data sources, thereby enabling the real-time tracking of cryptocurrency transactions and the users involved. As the text of the patent makes clear, this technology could potentially be offered to governments, who would be able to link crypto addresses to official IDs:

“The electronic retailers may combine the shipping address with the bitcoin transaction data to create correlated data and republish the combined data as a combined data stream. A group of telecommunications providers may subscribe downstream to the combined data stream and be able to correlate the IP (Internet Protocol) addresses of the transactions to countries of origin. Government agencies may be able to subscribe downstream and correlate tax transaction data to help identify transaction participants.”

Given the arrival of such technology (and the current existence of such firms as Chainalysis), it’s only a matter of time before transactions involving Bitcoin, Ethereum or any other non-privacy cryptocurrency will be systematically de-anonymized. It will take some time, particularly given that Amazon’s patent requires its users (e.g. retailers and telecoms providers) to combine separate pieces of data in order to create correlations. Still, it’s becoming increasingly apparent that things are moving in only one direction when it comes to the privacy and anonymity of crypto.

Privacy coins

And in light of this direction, anyone wanting to keep their chances of being identified as low as possible is advised to migrate to one of the so-called privacy coins. Monero is the most well-known of these, having entered into 10 most valuable cryptocurrencies by market cap since its initial launch in April 2014. More than anything else, what distinguishes it from the likes of Bitcoin is its CryptoNight proof-of-work algorithm, which uses a mix of ring signatures and stealth addresses to not only bury the sender’s wallet address in those of multiple other users, but also to hide the precise amount being transferred.

It’s because of this that the cryptocurrency has proven popular with those who’ve needed to evade government power (for whatever reason), and such is Monero’s apparent ability in preserving anonymity that its price increased by around 2,883% between Jan. 1 and Dec. 31, 2017 (from $12.3 to $358). By contrast, Bitcoin’s 2017 growth rate was a slightly less impressive 1,357%.

2,883% may be impressive, but it pales in comparison to the 9,000% growth enjoyed in 2017 by Dash, another altcoin with certain privacy-enhancing qualities. The 13th most valuable cryptocurrency by total market cap, its PrivateSend feature mixes addresses so as to obscure the origins and destinations of transactions, in the process making it noticeably harder for any interested authority to put the pieces together.

This may be a part of the reason why the currency has took off so spectacularly in Venezuela, where the government cracked down on such cryptocurrencies, such as Bitcoin, in a big way last year (before showing favoritism towards its own oil-backed Petro coin). Venezuelans also turned increasingly to Zcash during this period, which has become the 21st biggest cryptocurrency since launching in October 2016. Building upon Bitcoin Core’s architecture and using zero-knowledge proofs, it keeps the sender and receiver’s pseudonyms private, while also doing the same for the quantity being transacted.

Therefore, a choice of privacy coins is available for anyone worried about the growing ability of governments to track crypto transactions. And even if a concerned crypto user holds no Monero, Dash, or Zcash, they can still take advantage of the various mixing services available for non-privacy coins. For example,there are anonymization protocols available that, much like the features available via Monero and Zcash, enables senders and receivers of Bitcoin to mix their transactions with those of other senders and receivers, making it very difficult to disentangle the multiple threads involved. Such protocols include the likes of CoinJoin, Dark Wallet,, SharedCoin, and CoinSwap, all of which also provide holders of Bitcoin and other cryptos with the ability to anonymize their transactions.

So even though cryptocurrency tracking is increasing, crypto investors and holders needn’t be overly fearful of government surveillance. For one, most of the tracking systems in use or which are being developed rely on input from crypto-exchanges, while others (such as those provided by Chainalysis) depend on scavenging data that users may have left carelessly throughout the web. Meanwhile, more direct and intrusive methods being honed by the NSA also rely on crypto users unknowingly compromising their internet connections, something which couldn’t be counted on for monitoring all cryptocurrency transactions en masse. This is why, in addition to such privacy coins as Monero and Zcash, privacy-conscious crypto holders shouldn’t be too concerned, since there are ways of remaining anonymous for those who want it bad enough.


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On Monday, Oct. 1, Venezuelan President Nicolas Maduro announced the official launch of the country’s official cryptocurrency, called Petro, alongside the release of the Spanish-language white paper for the coin.

Nicolás Maduro@maduro_en

From , Venezuelans will buy Petros for Bolivar Soberano. They will buy real property, flight tickets, goods, services and save money in our gold, iron, diamond, aluminum and oil-backed cryptocurrency.

Available for Purchase Next Month

According to Maduro, the cryptocurrency will be available for purchase starting November 5, when Venezuelan residents will be able to exchange the current fiat currency the Bolivar Soberano for Petro. Maduro announced in the new white paper that Petro, now the national cryptocurrency of Venezuela, will include support from gold, diamond, iron, and aluminum crypto-assets.

Maduro said in a message posted Monday:

“Historic day for the Homeland. The official international and national launch of PETRO. Guarantee of the prosperity of our beautiful Venezuela for the consolidation of the socialist model for the benefit of our people.” 

Maduro also created on Monday night an organization to oversee his country’s crypto assets, which he has dubbed the National Superintendency of Cryptoactives and Related Activities, or Sunacrip. President Maduro said in a release that this launch is the start of a ten-year plan involving Petro and that he hopes to use it to stabilize the country’s economy.

Backed by Commodities

The main commodity of Venezuela Maduro is using to back his cryptocurrency seems to be the country’s oil reserves. He said via state media that starting November 5 Venezuelans will be able to register for and participate in Petro, which will be open for the next two months and operate “in two speeds.”

People are now reportedly able to exchange bolivars for Petro, and those units of cryptocurrency will be backed by Venezuela’s oil, gold, diamond, iron, and aluminum assets. Holders of Petro will then be able to use their crypto for international transactions. Users must create a wallet on the website set up for the purpose by the Venezuelan government.

Is it Ethical to Invest in the Petro? A Close Look at Venezuela’s New Cryptocurrency
Related: Venezuela: Petro Cryptocurrency Becomes National Unit-of-Account

According to that site, the Petro is the “first crypto asset issued and endorsed by a sovereign state.” It uses the X11 hash algorithm and uses a hybrid of the PoS and PoW algorithms to protects its customer’s assets. Petro’s API is also available on the site for developers to download.

According to Al Jazeera, Venezuela will “pre-mine” the currency and the government will be the one to control it. It has already allocated five billion barrels of oil to back Petro, and the price will be tied to the price of Venezuelan oil.

During the pre-sale period, the Petro is being sold in fiat currency and cryptocurrencies like Bitcoin and Ethereum. After the presale period, Petro will be available for purchase will bolivars.

Once residents purchase them, they’ll reportedly be able to buy goods and services at vendors who accept the currency. Government Cryptocurrency Superintendent Carlos Vargas said that “in a short future, Venezuelans can buy in the bakery with the Petro.”

Whether the currency will help the country still remains to be seen. According to Al Jazeera, Venezuela has deals in place with Brazilian companies to accept the currency, but U.S. President Donald Trump has signed an executive order barring American businesses from accepting it, and U.S. officials have called the currency a “scam.”


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Ripple will lead a group of crypto startups to lobby lawmakers and financial regulators in D.C. to support crypto and blockchain innovation, Bloomberg reported on Thursday, September 27.

According to the report, the coalition of San-Francisco-based crypto firms is planning to pay Klein/Johnson Group, a bipartisan lobby group, to assist the crypto and blockchaincommunity in conveying to regulators that the industry needs support from the government.

The new group, called the Securing America’s Internet of Value Coalition, aims to soften the government’s stance in order to encourage innovation and support competition in the ecosystem of global crypto markets.

The coalition, together with the lobby group, will raise issues with Congress, as well as the Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS), and other agencies that have relations to cryptocurrencies.

According to the preliminary agreement, the fintech lobby group Klein/Johnson will reportedly receive around $25,000 a month and 10,000 in Ripple (XRP) from the coalition. As Bloomberg reports, the company is planning to convert the cryptocurrency into dollars by the time it discloses the payments on federal lobbying forms.

Along with Ripple, as well as independent foundation RippleWorks, the coalition will also feature digital payments firm Coil, crypto investment company Yaka, and PolySign, a startup that is set to launch a crypto custodian.

Chris Larsen, executive chairman of Ripple, commented that while the company admits that the matter is “really complicated,” due to a great deal of “misinformation,” there is still “a lot of interest in this topic in D.C..”

The companies’ lobbying move follows the increased attention of Congress and other agencies like the SEC towards cryptocurrencies. Yesterday, a group of Congress lawmakers sent a letter to the SEC, urging the regulators to provide more clarity in regard to cryptocurrencies. Specifically, the lawmakers have reportedly requested the SEC to confirm whether digital tokens can be identified as securities or not.

On September 26, the U.S. House of Representatives passed a bill to establish a crypto task force to combat terrorist use of cryptocurrencies.

In June, SEC chairman Jay Clayton claimed that major cryptocurrency Bitcoin (BTC) is not a security due to its function as a replacement for sovereign currencies. Around a week later, a senior SEC official claimed that the top altcoin Ethereum (ETH) will be not regulated as a security, while Ethereum co-founder has previously denied that ETH was ever a security.

Concerning Ripple, in April, the company’s chief market strategist Corey Johnson stated that Ripple is “100 percent clear” and not a security since it does not meet the standards of what a “security is based on the history of court law.”


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The Dubai Department of Finance (DoF) has partnered with the Smart Dubai Office (SDO) to launch a blockchain-powered payment system. The news was reported on by a local news site Zawya, September 23.

The new platform, called “Payment Reconciliation and Settlement,” was officially launched Sunday, September 23. It is reportedly geared towards governmententities, such as the Dubai Police, Roads and Transport Authority (RTA), Dubai Health Authority (DHA), and others.

According to Zawya, the Dubai DoF and SDO intend for the system to provide for a more accurate and transparent governance process, as well as to enable real-time payments within and between government structures.

As Zawya reports, the currently existing process for transactions in Dubai government is time-consuming, requiring up to 45 days to complete any given operation.

The new system is reportedly already in use by the Dubai Electricity and Water Authority (DEWA) and the Knowledge and Human Development Authority (KHDA), with a total number of test transactions amounting to more than five million.

Dr. Aisha Bin Bishr, Director General at the SDO, commented that blockchain is “one of the most promising of [emerging] technologies.”

In 2017, the SDO group was granted the top honors at the Smart Cities Expo and World Congress in Barcelona, acquiring the City Project Award from among 308 other teams for their Dubai blockchain Strategy.

The Smart City project was reportedly introduced by Vice President and Prime Minister of the UAE and Ruler of the Dubai Emirate Sheikh Mohammed bin Rashid in 2013. Supported by the government, private sector, and institutional partners, the organization’s goal is to provide a smart ecosystem for cooperation between government entities and residents and visitors.

Smart Dubai is not the only government-backed initiative that intends to employ major emerging technologies such as blockchain in the country.

In April of this year, the UAE Vice President and Prime Minister launched the “UAE Blockchain Strategy 2021” initiative, with a goal to achieve the position of a global leader in adopting the technology.

In July, the Dubai International Financial Centre (DIFC) announced its partnership with Smart Dubai to develop a “Court of the Blockchain.” The organizations aim to explore the potential of the technology in addressing the shortcomings of the UAE’s legal system, for example by introducing blockchain-based verification of court judgements.


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