Just one week ago, Indian officials arrested the co-founder of an Indian cryptocurrency exchange, Unocoin, for operating a Bitcoin ATM kiosk which the police called “illegal”. One of Unocoin’s co-founders has now given a recount of his arrest in a recent interview.

The Unocoin co-founder’s arrests were largely publicized and was seen by many as the Indian government’s way of flexing their muscles against the cryptocurrency industry, which they have been at war with since they first barred crypto exchanges from engaging in banking relationships earlier this year.

On October 23, Harish BV, one of the co-founders, was arrested at the Kemp Fort Mall in the southern city of Bengaluru just a week after Unocoin had installed, what it has advertised as, India’s first-ever Bitcoin ATM. Harish was working on the ATM and making sure that all the systems were flawless and fully operational before it went live.

Indian Government Not Wanting Exchanges to Bypass Ban Via Bitcoin ATMs

The ATM was unique in that it was meant to be a fiat gateway for Indian cryptocurrency investors looking to trade cryptocurrencies, as they could deposit funds that could in turn be used to trade cryptocurrency on the Unocoin platform. Users would also be given the opportunity to withdraw funds from their account.

Harish said that the operational tests and upgrades were in their final stages when police entered the mall and took him in for questioning. After questioning, they took him into custody, claiming that the ATM had violated Indian law as it lacked the required approvals.

The next day, Sathvik Vishwanath, another Unocoin co-founder, was also arrested by the police.

The kiosk cleverly exploited a loophole in the government’s so-called “cryptocurrency ban”, as it allowed investors to deposit and withdraw funds by removing the banking middle-man. The arrests were likely the governments way of saying that they will not tolerate exchanges utilizing any loopholes to bypass the banking relations ban.

After posting bail, Vishwanath recounted the situation to Quartz India, saying:

“I knew this was coming after Harish was charged. I was at home that morning, trying to figure out what needs to be done to get Harish out of police custody, when the officials came to my house. They took me for questioning and later I was also charged and sent to judicial custody.”

He also noted that the police had unfoundedly accused his exchange of duping customers, saying that he had “promised 2x returns” and was “trying to cheat customers”. Vishwanath noted that his exchange has never made any such promises to their clients, and that they have never received a complaint regarding anything of the sort.

The police’s cybercrime department also spoke about the arrests, saying that the exchange had not received permission from the state government to operate the kiosk, and further noted that they were operating “outside the remit of the law”.

Swaroop Anand, the lawyer representing the Unocoin co-founders, spoke about why the government’s actions were not justified, saying that the mall in which the kiosk was located would have already received the necessary approval and licensing to hold a kiosk of this sort.

“It is a kiosk that is being set inside the mall and the mall would have had already taken trade permissions. Therefore, there was no need for Unocoin to take any other permission and there had not been any violation of licence requirements.”

It still remains to be seen whether or not the police will begin arresting other cryptocurrency exchange executives on baseless charges in an effort to censor the industry.

This post credited to News BTC  Image source: News BTC

The head of an Indian nonprofit trade organization said cryptocurrency is “illegal,” and urged businesses to obey the law, local news daily the Hindu reportedThursday, Oct. 25.

Debjani Ghosh, the president of the National Association of Software and Services Companies (NASSCOM), was cited by the Hindu saying that cryptocurrencies are illegal from NASSCOM’s perspective. NASSCOM is a nonprofit trade association of over 2,000 member companies for the Indian IT and business process outsourcing industries.

“It is [the] law of the land and hence, we have to work with it,” Ghosh claimed about cryptocurrency’s ‘illegal’ status. She added, “If we do not agree, we have to go back to the government and speak about why cryptocurrencies aren’t correct.” However, Ghosh noted that the “illegal” status of crypto is the result of the government’s failure to keep up with innovation:

“The genesis of this problem, however, lies in the failure of policy making not keeping pace with rapid technological changes. NASSCOM’s focus would be to say, how do you synergize technological development and policy making. I think that will be our focus.”

Cryptocurrency is currently legal in India, but in July the Reserve Bank of India (RBI) banned the country’s banks from servicing businesses involved in exchanging or processing digital assets. At the time, RBI cited risks to financial stability and the security of investors as being the main reasons behind the ban.

Following the crackdown, commentators were quick to note that, while banking activities for crypto business were suspended, it was not a ban on crypto in India outright. The country’s supreme court continues to uphold the ban even after hearing a raft of petitions.

Since July, the ban has had severe repercussions for the industry. Exchanges in particular have faced difficult conditions, with major platform Zebpay halting operations and relocating to crypto-friendly Malta.

Ghosh’s comments come after police clamped down this week on a project from crypto exchange Unocoin, arresting its co-founders after they installed a Bitcoin ATM in a Bangalore shopping mall.

Various media outlets have cited authorities who reportedly explained that the ATM “had not taken any permission from the state government and is dealing in cryptocurrency outside the remit of the law.” According to a police official quotedby the Times of India, the central bank considers cryptocurrency “illegal.”

This post credited to Cointelegraph  Image source: Cointelegraph

The Indian subsidiary of major global banking and financial services firm HSBC and India’s holding giant Reliance Industries (RIL) have completed a blockchain-enabled trade finance transaction, Indian business newspaper The Hindu Business Line reports Sunday, Nov. 4.

The blockchain-powered letter of credit (LoC) transaction, reportedly the first of its kind in India, involved export by RIL to U.S. client Tricon Energy, which sufficiently reduced both the time and costs of processing documentation. The new system represents a significant improvement in global export market interactions by bringing all parties together on one platform, The Hindu Business Line notes.

According to the article, the transaction solution has been implemented through the integration of blockchain with an electronic bill of lading (eBL) platform dubbed Bolero. First introduced in November 2016, the Bolero eBL system allows for the issuance and management of electronic bills of lading, as well as enables digital transfers of goods titles from sellers to buyers in a trade.

RIL’s joint chief financial officer Srikanth Venkatachari commented that the new blockchain deployment has demonstrated a significant potential to reduce timelines involved in managing export documentation from the “extant seven-ten days to less than a day.”

Earlier this week, a group of major global banks, including U.K.-based HSBC, BNP Paribas, and Standard Chartered, launched a blockchain platform to address the financing of international trade. The platform, dubbed eTrade Connect, is reportedly able to reduce the time needed to approve trade loan applications from 36 to four hours.

In May of this year, international daily newspaper Financial Times reported on HSBC completing the first global trade finance transaction powered by blockchain. The transaction involved a LoC for U.S. food and agricultural conglomerate Cargill.

This post credited to Cointelegraph  Image source: Cointelegraph

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.

After months of public uncertainty bought on by years of deliberation by the Indian government, authorities have discussed the framework to legally ban the usage of ‘private’ cryptocurrencies like bitcoin.

In the 19th meeting of the Financial Stability and Development Council (FSDC) headed by India’s finance minister Arun Jaitley on Tuesday, the subject of cryptocurrencies took the floor.

According to a release by the Indian Government’s Ministry of Finance through the Press Information Bureau, the working group “deliberated on the issues and challenges” of cryptocurrencies in the country.

Pointedly, an inter-governmental committee tasked to study and propose a legal framework for cryptocurrencies has, instead, suggested a ban on using cryptocurrencies in India.

The full excerpt from the press release reads:

“The Council also deliberated on the issues and challenges of Crypto Assets/Currency and was briefed about the deliberations in the High-level Committee chaired by the Secretary (Economic Affairs) to devise an appropriate legal framework to ban use of private crypto currencies in India and encouraging the use of Distributed Ledger Technology, as announced in the Budget 2018-19.”

It’s crucial to note the phrasing used in the public release here.

Enforcing a legal framework to ban the “use” of cryptocurrencies could extend to trading and its application as a payment instrument but not necessarily owning cryptocurrencies.

As domestic industry source CryptoKanoon, which has been following the entire saga, reports:

Crypto Kanoon@cryptokanoon

Mr. Garg briefed FSDC Council on:

“..deliberations in the High-level Committee to devise an appropriate legal framework to ban use ofprivate crypto currenciesin India”

Does the abovesaid indicate that the possession and trading of Crypto are going to be permitted?

The domestic cryptocurrency trading has already been largely nullified as a result of the banking ban enforced by the central bank in April, leading to the shuttering of at least one major Indian exchange recently.

This story is developing…

 

This post credited to ccn  Image source: CCN

The co-founder of Indian crypto exchange Unocoin has been arrested shortly after setting up an allegedly unregistered Bitcoin (BTC) ATM machine in Bangalore, English-language daily Times of India reports Oct. 24.

The 37-year-old co-founder, Harish BV, was apprehended by police after having reportedly  installed the ATM kiosk at Kemp Fort Mall on Old Airport Road, together with fellow Unocoin co-founder Sathvik Viswanath. The latter has not been arrested, as per media reports.

Indian business magazine Business Today (BT) cites a press statement from the Central Crime Branch (CCB), which claims the ATM installation did not receive “any permission from the state government and is dealing in cryptocurrency outside the remit of the law.”

CCB officials are further reported to have seized “a teller machine, two laptops, a mobile, three credit cards, five debit cards, a passport, five seals of Unocoin company, a cryptocurrency device and Rs 1.8 lakh ($2,460).”

As corroborated by multiple local Indian media sources, the ATM had not in fact yet been operational ahead of the police action, with Unocoin tweeting Oct. 20 that:

“Our Machine didn’t go well with few mainstream media reports who projected it under a negative light. The machine is still under final testing mode and it will be up and running in the upcoming week. The machine has been temporarily moved from its original place of installation.”

Harish BV was reportedly presented before an ACMM (Additional Chief Metropolitan Magistrate) court, which sent him to police custody for seven days. Police are said to have stated that “more arrests are likely,” and to have appealed to the public “not to be lured by the prospect of making huge profits” through crypto.

The Times of India reports the machine was used to facilitate cryptocurrency deals, with Indian digital newspaper The News Minute (TNM) outlining that it had been set up in response to the Reserve Bank of India (RBI)’s stringent ban on financial institutions dealing in cryptocurrencies.

TNM further cites Unocoin as saying that it had attempted to establish “newer mechanisms and solutions to reduce the […] [regulatory] hurdles [caused] by the present central government’s stan[ce].” Users of the machine could reportedly withdraw and deposit Bitcoin, but not buy or sell the cryptocurrency.

Referring to Minister of Finance Arun Jaitley’s 2018-19 budget speech, Unicoin’s Viswanath is quoted by the Times of India as saying that:

“The minister’s statement was clear: Cryptocurrencies are not legal tender in India. He did not say ‘illegal tender.’ There’s a huge difference. It means you bear the risk of your investment and there’s no regulation for the industry.”

As previously reported, Unocoin this summer announced it had suspended fiat deposits and withdrawals “as per orders” from the RBI. Crypto asset deposits nonetheless continue to be active on both Unocoin’s crypto-rupee trading platform and partner crypto-crypto exchange Unodax.

This post credited to Cointelegraph  Image source: Cointelegraph

Indian regulators’ clampdown on cryptocurrency businesses is forcing the exchange startup Unocoin to experiment with stablecoins and ATMs to continue receiving fiat deposits from customers.

Unocoin co-founder Sunny Ray told CoinDesk his company hasn’t been able to transact through regular banking channels with its 1.3 million customers for several months, after the Reserve Bank of India (RBI) banned banks from working with crypto or crypto companies in April.

Most recently, Unocoin set up an ATM in a Bangalore mall where customers can deposit rupees to their exchange accounts without a bank or credit card. In the coming weeks, Unocoin will open a few more ATMs in Mumbai and Delhi.

“We’re essentially employing bank-grade ATM machines,” Ray said.

Also, some users are quickly transferring their rupees to the ethereum-based TrueUSD token, which Unocoin began supporting in August, then using it to purchase bitcoin or other assets down the line when the price feels right. As a so-called stablecoin, TrueUSD is designed to maintain parity with the U.S. dollar.

For customers outside Bangalore, support for stablecoins may provide an indirect way to add or hold value in their Unocoin accounts without quite as much volatility, albeit it falls short of a fiat on-ramp. However, that transaction volume is still less than a few thousand TUSD per day.

“We never even considered that [stablecoins] before,” Ray said. “That’s more just like a stop-gap solution. It’s not like an actual, final solution to everything.”

As Unocoin investigates how to scale compliant ATMs, Ray said the team is also looking to expand to Malta and Canada, in case operating in India becomes impossible altogether, all while exploring the options for listing several new stablecoins.

Stepping back, an ongoing legal battle to overturn or alter this ban hasn’t yielded any results to date. Meanwhile, the ban is having a disastrous impact on India’s crypto community, with the popular exchange startup Zebpay abruptly shutting down late last month.

As Kashif Raza, a co-founder of Crypto Kanoon, an Indian regulatory news startup, told CoinDesk:

“The crypto community is suffering from this ban as there have been instances where the bank accounts of individuals have been closed who were found to be dealing in cryptocurrencies.”

The crackdown has been so severe that Raza said it has created a misconception in India that bitcoin itself is outlawed, even though the ban only applies to entities governed by RBI.

“From a regulatory perspective there hasn’t been any real clarity,” Ray said. “We as a company are working on a couple of solutions.”

Silver lining

None of this should imply that Indian crypto startups are now operating in a black market. To the contrary, Raza said exchange accounts can sometimes require more know-your-customer (KYC) paperwork than opening a new Indian bank account. Many see the ban as an inconvenient pause, not a death knell.

“Given the fact that the Indian government seems to be in favor of the technology behind virtual currencies, the crypto community is quite hopeful that [banking crypto companies] will be regulated in future,” Raza said.

Plus, Unocoin’s ATMs allow for regulation-conscious investors like Karthik Reddy of Blume Ventures, who praised the new ATMs in a press statement, to keep detailed records of their crypto portfolios while still depositing fiat currency as needed.

On the other hand, the ban has certainly invigorated peer-to-peer trading. Indeed, the P2P exchange WazirX reached a new daily trading volume peak of 50 BTC in September 2018. At the same time, the global P2P exchange LocalBitcoins reached nearly $1.5 million in weekly Indian trading volume at least three times since August.

And there’s even silver lining for Unocoin, which has seen up to 500 new account registrations every day ever since Zebpay closed its doors.

“It’s almost kind of freeing in a way because there are a lot of people in India that don’t have online banking,” Ray said. “Almost everybody in India uses cash, so it might in an odd way open us up to an even bigger market.”

Still, speaking to how restricting crypto companies that seek to serve a country of 1.3 billion could affect global adoption, Ray concluded:

“Innovation is being squashed in a country where one in seven people live.”

This post credited to Coindesk Image source:  Unocoin. 

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, bestmixer.io, 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.

 

This post is credited to cointelegraph  Image source: Cointelegraph

Blockchain technology continues to thrive in India. In contrast, the stance toward cryptocurrencies remains negative and unfriendly. So much so that major crypto exchanges like Zebpay were forced to shut down.

Cryptocurrency Exchanges in India Forced to Close Shop

The situation regarding crypto in India continues to deteriorate. A lack of proper regulations, as well as a generally negative stance toward blockchain technology has led to cryptocurrency exchanges being forced to terminate their services.

Due to the Central Bank of India’s diktat, other banks of the country are not allowed to undertake any transactions even remotely related to cryptocurrency trading. According to Zebpay’s blog post, this situation has damaged the Zebpay’s business, but it has also ‘crippled’ its customers’ ability to transact business in any meaningful way.

Since the exchange was not able to find an alternative way to conduct its business, it is now forced to shut down. Meanwhile, the Reserve Bank of India (RBI) remains unsympathetic to the exchange’s troubles. This negative stance towards cryptocurrencies has only intensified after the price surge of late 2017. In fact, the bank issued a ban on lenders in April 2018, ordering them to immediately cease all business dealings that include cryptocurrencies.

The RBI was then taken to court because of this decision, but the country’s supreme court has yet to rule on the matter. The process will likely take quite a lot of time, which cryptocurrency exchanges simply cannot afford. As mentioned, Zebpay, and likely other exchanges as well, attempted to find an alternative way to conduct their business, but to no avail.

Blockchain Technology Continues to Thrive

In contrast to the cryptocurrency situation, it would appear that India is still very supportive of the blockchain technology itself. The country’s NSE (National Stock Exchange) has announced tests of a new use case for this technology. According to their announcement, they plan to introduce e-voting via blockchain for various companies listed on their platform.

The project’s pilot will involve connecting the regulator with companies, as well as the RTA via blockchain. Right to vote will be tokenized, and the evaluation of this test will be based on auditability of various on-chain actions and the complexity of conducting the entire process.

NSE’s Sankarson Banerjee has stated that blockchain’s immutable nature can ensure complete transparency of each action taken by network participants. In addition, synchronization of the process of vote counting will be possible in real time thanks to the smart contract framework. Such features will ensure the creation of a new environment where corporate governance and compliance will be significantly improved.

The blockchain used in the voting process will be created through the use of Elemential platform’s Hyperledger framework.

Elemential Lab’s CEO, Raunaq Vaisoha, also commented on the pilot by stating that blockchain will enable an immutable trail of all activities in real time. This is seen as a significant move toward clear and highly transparent corporate governance. It will also present a new standard that other companies will be aspiring to achieve.

 

This post credited to News BTC  Image source: News BTC

Zebpay, one of India’s largest cryptocurrency exchanges, is closing down amidst the country’s tight reins on exchanges and banks that work with them.

The exchange writes in a blog post that, “The curb on bank accounts has crippled our, and our customers’, ability to transact business meaningfully. At this point, we are unable to find a reasonable way to conduct the cryptocurrency exchange business.”

The Reserve Bank of India (RBI) has fought a war against cryptocurrencies for years, culminating with forbidding regulated financial institutions from dealing with cryptocurrencies. At the time, all institutions were given three months to cease such operations. After those three months, in July, India’s top court refused to overturn that ban, stating that the central bank is trying to “cut off an avenue for crimes using cryptocurrencies.”

This has led cryptocurrency exchanges to various struggles. Some exchanges have attempted to circumvent the banking ban by introducing peer-to-peer trading, where the exchange merely functions as an escrow service for direct transactions between users.

Zebpay had stopped all fiat deposits and withdrawals at the exchange a day before the banking freeze, which happened on July 5th, 2018. However, they could not keep up. “Despite regulatory and banking problems along our journey, we continued to look for solutions as we did not want India to miss the bus of digital assets that power the public blockchain. However, the recent past has been extremely difficult,” the blog post explains.

Zebpay struck half a million downloads on the Android smartphone platform in mid-2017 and quickly doubled to hit a million app downloads during 2017’s bull run in October. It now has 3 million users using its iOS and Android apps, with support for 20 cryptocurrencies and 22 trading pairs, according to its website.

However, another major Indian cryptocurrency exchange was quick to reply to Zebpay’s announcement: Koinex took to Twitter to reply to Zebpay’s tweet with an image that says, “In case of emergency, break glass,” sporting the Koinex logo. Some marketing opportunities are too good to let them pass you by.

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Trading on Zebpay during the last 24 hours (UTC 11:20 AM):

Major Indian Crypto Exchange Shutting Down 102
Source: coinmarketcap.com
This post credited to cryptonews  Image source: Cryptonews