Tag: ICO

KYC & AML: Designed to Resuscitate the Crypto Market

Crypto market stagnated. And let there be no obscuring of that. We are now in a ‘buffer crypto-zone’, waiting for turning points to occur. The entire 2018 was mostly bearish, and today, everyone, including investors and crypto-related business initiators, is expecting the year 2019 to be more crypto-friendly.  New regulations, combined with KYC and AML procedures, are designed to contribute to the flourishing future of the crypto world.  Many critics say that abovementioned ‘duo’, besides being a calling card of company’s credibility, also acts as a ‘double edge sword’ and kills users’ anonymity.  But we have something to say in return: the absence of KYC and AML can kill the entire crypto space. Illustrative statistics of 2017 demonstrates a pretty obvious thing. 2 years ago, when KYC and AML were in their infancy, only 24% of ICOs worldwide had an official legal status. And one more study prepared by Statis Group shows that more than 80% of ICOs conducted in 2017 were identified as scams.  This leads to the conclusion that the appropriate legal support does not protect investors, and does not allow ICO initiators to carry out an ‘exit scam’ scenario.  We must admit that we live in a harsh world, and it’s far from utopian. Users with contrived and malicious intentions have always tortured the crypto world. That’s why regulatory measures must not be neglected. Crypto field has been and, actually, is the great ‘bait’ for fraudsters and criminals, especially when this bait is not essentially regulated.  Let us take, for example, an ICO model, where the money laundering is deplorably flourishing. In simple terms, an ICO takes one’s asset and redeems it for another - a token. These tokens can be freely traded for other crypto or fiat currencies on exchanges worldwide. This system presents a major risk for ICOs. They could easily be used for laundering proceeds of crime.  Many within the industry believe that the future of ICOs may instead lie in security token offerings (STOs). In a nutshell, the STO is an ICO-like investment model. The key advantage of using this route is that token holders are fully protected by the very same financial regulations as used in traditional security-based projects. Self-regulation is needed, but is still hard to be implemented. Max Grain, a Product Management Executive of company Bitlish, explains:  “Scaling brings its own changes and challenges, and a company’s team has to be ready to adapt. Procedures that worked well when you were small may have to give way to a more defined systems and procedures over time as the company grows” Hopefully, not only self-regulations are coming to the crypto market. For instance, in March 2018 the US Department of the Treasury published a letter summarizing its interpretation of the Bank Secrecy Act as it pertains to ICOs. The letter stated that: “Generally, under existing regulations and interpretations, a developer that sells convertible virtual currency, including in the form of ICO coins or tokens, in exchange for another type of value that substitutes for currency is a money transmitter and must comply with AML/CFT requirements” Last year, European Union also introduced crypto anti-money laundering regulation. Here the regulation applies not to ICOs, but to exchange services between virtual and fiat currencies, and custodian wallet providers which don’t comply with the AML directive.  These businesses become “obliged entities” under the new AML/CTF legislation, similar to traditional financial institutions such as banks. They are obligated to implement measures to counter money laundering and terrorist fundraising, such as customer due diligence (including KYC) and transaction monitoring. They are also required to maintain comprehensive records and report suspicious transactions. The only problem which these regulations entail is that they are not standardized. Andrei Popescu, a Co-Founder of COSS.IO, says AML should be harmonised worldwide: “Despite calls for the adoption of global AML standards for crypto assets trading, no such uniform rules have yet emerged. Differences in national regulations include the existence of special licensing requirements for Crypto Exchanges, the extent to which AML rules also cover administrators and wallet services, the extent to which ICOs are covered by securities laws or equivalent regulations with AML regulatory implications, and the extent to which a crypto-to-crypto exchange is treated differently from crypto-to-fiat exchange. In many cases, the regulatory status of these activities is either ambiguous or case-specific, or is otherwise subject to pending changes in law and regulation” The other side of the crypto-coin is trust. Market needs some time until community will get accustomed to every new regulation and legal improvement. Srdjan Mahmutovich, Kriptomat CEO, states on the issue:  “Crypto space is so fresh and new that no one knows where it all finishes, as we are at the beginning stage. One thing is clear - we do need to put in place more regulation; otherwise we won’t be able to attract all the masses of users to come here. People trust banks. Generally speaking, they do because they use their services on a daily basis. Time will show how much regulation should be put in place in order to secure the user and prevent abuse. Some people, if there`s no KYC, are actually worried, asking whether their assets secured. And that’s what KYC and AML will solve” Evolution is a long-term process, and the crypto market is no exception. We are standing on the verge of a new era – ‘Era of Regulation’ – a crucial period for the crypto world. Backed by harmonized regulation, cryptocurrency will be a great instrument for those who are keeping the interest of the society in mind as a top priority. AML and KYC will help keep it, and what’s more – will help meet it in a fully secure and trustworthy manner.  * This article is based on the exclusive interviews with top-managers of several crypto exchanges. Cryptonomos is most grateful to Andrei Popescu, Co-Founder of COSS.IO, Srdjan Mahmutovich, Kriptomat CEO, and Max Grain, a Product Management Executive of Bitlish.

Articles/January 24, 2019

Will 2019 be the year of STOs?*

It is past the middle of January. Time of the World Economic Forum in Davos, time of skiing, time of January blues and Siberian frosts, time of sitting by the fireplace with a good book and a glass of hot mulled wine… or, on the contrary, time of meditating under the shade of palm trees somewhere in Vietnam…  Hope you have had great winter holidays, because after the November market meltdown when bitcoin lost 36% of its value, we all needed some relaxation. But now it is time to look at the crypto market with a sober glance. June 2018 was the last month when the ICO market demonstrated stellar performance, and investors fueled more than $5.8 billion. For the rest of the year the ICO projects raised from $450 million to $1 billion per month. "The crypto gold rush has left behind too many casualties; many non-accredited investors and speculators were victims to really bad ICO punts. So many ICO projects performed so bad, exasperated the recent bearish market conditions, with some even reporting over 99% losses from their all-time high prices”Andrei PopescuCo-Founder of COSS.IO   “And we have warned you!” say regulators to thousands of investors who are nursing their wounds. To be fair, they did warn. ICOs are "vulnerable to money laundering and terrorist financing risks due to the anonymous nature of the transactions, and the ease with which large sums of monies may be raise in a short period of time," said the Monetary Authority of Singapore (MAS) as early as in August 2017. Still, so far regulators have done little to protect companies that deal with crypto assets and institutional investors that are ready to invest in them. An investigation carried out by the WSJ shows that $88.6 million has been laundered through 46 crypto exchanges since 2016. Few of the market participants noticed an event that may have far-reaching consequences for all of them. In November 2018, during the market meltdown, the first security token exchange, OpenFinance Network, was launched. It listed two of the earliest security tokens: Blockchain Capital (BCAP) and SpiceVC.  This launch marked the beginning of the new era of the security token industry. STOs are often defined by the formula: “ICO + Legal Compliance = STO” The basic difference between ICO tokens and security tokens is that the latter represent investment contracts. Paradoxically, but the very idea of such tool might be proposed by the SEC chairman Jay Clayton who said once: “I believe every ICO I’ve seen is a security”. Security tokens are digital assets that are subject to federal and global security regulations.  "I’m confident that STOs will be hugely popular by 2019 as they offer a familiar path for traditional investors to enter the space and an array of benefits compared to both the traditional finance sector and ICOs"Andrei PopescuCo-Founder of COSS.IO   Strangely enough, but STOs might be a by-product of the insufficient regulation. STO sales give some legal rights to investors. If an STO fails, its investors will be able to get some money back, because the issuer has some legal obligations. Besides, security tokens are traded on compliant trading platforms only. “With more than $256 trillion in real-world assets that have yet to be tokenized, STOs present a real alternative for companies and investors. Hosting an IPO is undoubtedly expensive. With an STO, companies can allow for investment through tokenization, which significantly cuts admin and legal costs while keeping the company and the process transparent. With improved regulations, STOs will become the more desirable choice for investors as increasing amounts of VCs and Family Offices eye-up the space, hoping to capitalize on the distribution power of ICOs with a legal, secure method of investing.”Andrei PopescuCo-Founder of COSS.IO   To put it differently, market participants decided to take the matter in their own hands, while regulators are trying to find a way to tackle money laundering in the crypto sector.  While the industry is experiencing barbarian growth, self-regulation takes the major role in terms of customer protection, and that’s risky, says Johnny Lyu, KuCoin VP. “After all it will be the market that’s the most powerful. And where there is a market, there are rules, and regulators. There is nothing wrong about regulations, it is to clean up the market.” In October, 2018 the Paris-based Financial Action Task Force (the global watchdog for money laundering) promised to set up its first rules on oversight of cryptocurrencies by June, 2019. “There is an urgent need for all countries to take coordinated action to prevent the use of virtual assets for crime and terrorism”, FATF says. Meanwhile, at least one country that has already legalized STOs. It is Uzbekistan. In 2018 Uzbekistan President Shavkat Mirziyoyev created Digital Trust fund to invest in blockchain-related startups and research and development. Now the Digital Trust is looking at STO and starting to build the framework for it, said Bobir Akilkhanov, its investment director. The Cryptonomos Blog wrote about the three Middle Asian countries (Kazakhstan, Uzbekistan and Kyrgystan) as they attempt to position themselves at the forefront of blockchain technology adoption.     * This article is based on the exclusive interviews with top-managers of several crypto exchanges. Cryptonomos is most grateful to Andrei Popescu, Co-Founder of COSS.IO; Johnny Lyu, KuCoin VP; Srdjan Mahmutovich, Kriptomat CEO; Jason Wang, CHAOEX CEO; Max Grain, Product Management Executive of Bitlish, and Alex Strześniewski, Business Development Director at CoinDeal.

Articles/January 22, 2019

Biggest Risks for Crypto Exchanges: Internal Errors, Hacker Attacks, and Money Laundering

Invest in reliable assets, diversify your portfolio and choose a good crypto exchange, says a well-known maximum for investors. But as it often happens it is more easily said than done. Today we will talk about crypto exchanges and the risks related to them. This article is based on the exclusive interviews with top-managers of several crypto exchanges. Cryptonomos is most grateful to Andrei Popescu, Co-Founder of COSS.IO; Johnny Lyu, KuCoin VP; Srdjan Mahmutovich, Kriptomat CEO; Jason Wang, CHAOEX CEO; Max Grain, Product Management Executive of Bitlish, and Alex Strześniewski, Business Development Director at CoinDeal. Hacker attacks, money laundering and internal errors are the biggest risks that crypto exchanges face, analysts and market participants agree There are several hundred crypto exchanges in the world (from 200 to 600+, by different estimates), and many of them know what a hacker attack is. ‘Especially lucky’ exchanges, including Mt.Gox, Bitcoinica, PicoStocks, and Bitcurex have been attacked several times. In the three biggest hacker attacks crypto exchanges and their investors lost more than $1.3 bn. In January 2018 hackers stole $500 million worth of NEM coins from Coincheck, in February 2014 - $460 million worth in Bitcoin from Mt Gox, and in February, 2018 - $187 million worth in Nano from BitGrail. Investors certainly do not like to lose money, especially when it happens through the fault of exchanges.   According to the ICORating’s Exchange Security Report, $1.3 bn has been stolen over the past eight years from just 30 crypto exchanges. The research showed that 32% of exchanges have bad code errors. Only 46% of exchanges protect their users’ personal details properly and have sound requirements to passwords. And only 4 percent of exchanges answer all safety requirements. However, crypto exchanges’ lack of security is not always their fault The crypto space is becoming more mature with the inflow of institutional money, says Andrei Popescu, Co-Founder of COSS.IO and SCX Holdings. “As soon as more institutional investors enter the space, the market will be less concentrated”, he says. Institutional money needs enterprise-grade infrastructure, and it is already there, offered by the most renowned brokers, including Goldman Sachs, JPMorgan, Bank of New York Mellon, Northern Trust, Mitsubishi UFJ Financial Group, etc. Institutional investors are also looking for more regulatory clarity, but this is something the market is only expecting to get. May be as soon, as this or next year.  Improved regulation is something that has not emerged yet. This is especially true about Anti-Money Laundering (AML) Regulation of cryptocurrency. At present AML policies in different countries are not consistent and sometimes misleading, Allen & Overy consulting firm says. For example, in the US “a given cryptocurrency may variously be considered a currency, a security, or a commodity (and potentially more than one of these at once) under overlapping US regulatory regimes”, while in China, that boasts the strictest approach to cryptocurrency, all issuance and exchange services for cryptocurrency is effectively prohibited. Allen & Overy defines AML Risks in cryptocurrency as ‘elevated’. Such risks include: trafficking in illicit goods, hacking and identity theft, market manipulation and fraud, and facilitating unlicensed businesses. “Anonymity, liquidity, and borderless nature of cryptocurrencies makes them highly attractive to potential money launderers”, Allen & Overy concludes.  Banks do not know how to work with crypto exchanges According to Srdjan Mahmutovich, Kriptomat CEO, two years ago in Europe the crypto regulation was quite loose, it was quite easy to get a payment processor, or to get bank accounts. The banks did not know anything about this industry, so it was open field for all these things”, he says.  Now this has changed. “Some banks don`t want to open account, and I understand why: because of ICOs, scam, they don`t have enough knowledge to assess this. But many of them are unwilling to open accounts for exchanges. Why? Because of potentially negative PR they might get”, Srdjan Mahmutovich adds.  Banks know that cryptocurrencies are involved in 10% of the total of the $2 trillion of dirty money that is washed annually, but many of them are in no hurry to adjust their AML programs to catch cryptocurrency criminals. “Some banks are not accepting accounts related to cryptocurrency because they do not know how to handle them”, said Natasha Taft, an AML expert compliance consultant in New York, to finops.co. Little surprise that bank AML specialists recommend that all cryptocurrency transactions made by customers from certain countries, including Russia, Venezuela, Lebanon, Iran, North Korea, the Ukraine and Turkey should be flagged as high risk. It means that banks will avoid transactions with all citizens from those countries, without looking if their money is ‘clean’ or ‘dirty’. KYC procedure: cure-all solution or not? To avoid the Mt.Gox situation, crypto exchanges use AML and KYC (Know Your Customer) procedures to monitor customer behavior, says Jason Wang, CHAOEX CEO. Both AML and KYC are easy for users who need only to upload certain scans of documents to do certification. Some exchanges seem to exist only because they do not comply with AML requirements, says Max Grain, Bitlish’s Product Management Executive. However, such players will eventually close or be shut down as new restrictions clean up the market. There are bound to be regulatory challenges or changes, personnel, personality, and product issues along the way that will challenge how your AML operations takes place, he adds. This is especially important for a growing company because larger volume brings more AML related tasks.  In terms of regulation, there are a lot of crypto companies that are breaking the law, says Alex Strześniewski, Business Development Director at CoinDeal. For example, some exchanges want to add fiat currencies and allow their users to trade without undergoing KYC. “Even if there's a limit within which you can trade (without KYC), you still break the law”, says Alex Strześniewski. Regulation is good, he says, although it will be much more difficult to acquire new clients.  “You can probably look at that like Forex, where you have to go through KYC, and I think some of the biggest exchanges are going to be basically chased for their users: user profiles, who's trading on that platform, and I think we are going to see a really big decrease in the biggest exchanges' trading volumes, because they'll maybe make them go through KYC and then just cut off half the countries, which are troublesome”, says Alex Strześniewski. KYC that is supposed to protect both crypto exchanges and investors turned out to be only a half-measure, because it also created a thriving black market for fake IDs. On Internet, including specialized Telegram channels, it is possible to buy (and sell) fake IDs, necessary to pass KYC: passport scan, selfie, scanned bank statement. These documents can be bought for as little $50; and investors snap up fake IDs as a means of protecting their own identity. Investors have good reasons for being frustrated. If the mailing list gets leaked, there will be attempts to socially engineer them, sell the addresses on the black market or even blackmail their owners, claiming to have filmed the victim watching online porn and threatening to send the video to their friends and family. It is little wonder that people prefer to pay $50 for fake ID to avoid all this, which makes KYC a useless tool.  “Exchanges need more database from different countries and authorities (terrorists, people under sanctions, etc.) to verify each user and make sure all data is trackable”, says Jason Wang.  Crypto exchanges still have to do some homework and close loopholes to ensure security of investor money. However, regulators from different countries are also expected to do some homework to make the crypto space safer. The market needs some technical tools for AML and CTF monitoring to become more mature and ‘enterprise-grade’ to answer interests of ‘big money’ and institutional investors.

Articles/January 16, 2019

Crypto Capitulation – Why are Prices Falling?

A number of narratives have emerged to explain the recent violent downwards movements in prices across the cryptoasset market. Today we'll examine a few of them. First up: Prices are declining because ICO projects are being panicked into selling all of their ETH reserves. Let's explore this one in more detail.   ICO projects raised funds in Ether. Those who conducted their ICOs early in the run saw the value of their treasuries climb throughout the bull market. ICOs still need to pay the bills in fiat, so at some point they need to sell large portions of their ETH reserves. But crypto's market volatility put ICO projects in a difficult spot: Should we sell our ETH on completion of our ICO? Or should we hold onto some of our treasuries in order to sell at the highest possible price? Twitter is full of anecdotal evidence that this is true for some projects, such as this from Ran NeuNer, a crypto fund manager: “Spent the morning with an ICO (not to be named) they raised $30m usd with a solid roadmap, they raised when ETH was $1200. They panicked and sold their remaining ETH last night – they have $4m left.” However, closer inspection of the evidence suggests that this isn't the case at all. Larry Cermack, Head Analyst at @TheBlock_, explains why: "Despite the decline in ETH price, the selloff hasn’t been as drastic as many analysts anticipated. In the past two months, treasuries of projects that held ICOs liquidated (or moved) 172,00 ETH, or ~4.6% of total holdings...Out of the 57 companies I tracked, 50% didn't move any ETH...one can assume that most projects have significant enough cash reserves that they haven't had to sell cryptocurrency reserves yet" So, it's unlikely that this is creating the current downwards move. However, some thinkers believe that ICO projects will eventually capitulate - selling their ETH reserves - and that this will create downward pressure on price in the future. Meltem Demirors, of @coinshares, MIT and Oxford University, explores why: "(In view of the state of the current crypto market) what’s an issuer likely to do? Sell the assets they can and hoard cash like it’s going out of style. What’s an investor likely to do? Sell the assets they can, take the hit, and free up mental and emotional energy to focus on generating a return for their investors. Add these two up, and we get capitulation — the action of surrendering or ceasing to resist an opponent or demand." So, this could happen yet. But it probably hasn't so far. The second narrative we'll examine, and a more likely candidate, is the recent Bitcoin Cash hard fork. Bitcoin Cash is the result of a scaling dispute within the Bitcoin community that led to a hard fork of the main Bitcoin blockchain in August 2017. The most notable change that BCH implemented was an increase in the block size limit, aimed towards improving transaction capacity that proponents said more closely aligned Bitcoin with its original vision. Just over one year later, the Bitcoin Cash community is now splitting into two camps again. First there's Bitcoin Cash ABC, which is the original Bitcoin Cash client that split away from Bitcoin. BCH ABC main proponents include bitcoin.com's Roger Ver and Bitmain's Jihan Wu.  Second there's Bitcoin Cash SV (Satoshi's Vision), led by Dr Craig Wright - the controversial Australian computer scientist who claimed (likely falsely) to be Satoshi Nakamoto and was later called a fraud by Vitalik Buterin. Wright wants to restore Bitcoin to its original protocol, increasing its block size limit and even perhaps bringing "lost" coins back into circulation. The Bitcoin Cash hard fork matters because it's creating a hash war. While most service providers, social media and crypto exchanges favour BCH ABC, Bitcoin SV is supported by all of the biggest Bitcoin Cash mining pools. Hashpower, conferred by miners, is an important indicator of security - and therefore legitimacy - in the cryptocurrency space. Craig Wright has explicitly stated that the BCH SC community will use any hash power under their control to 51% attack the BCH ABC chain "If we see an exchange sell (BCH), we will reject the transaction. Miners vote with hash. We will run ABC and we will make sure no trade ever happens, so there won't be anything. You want to know what (BCH) is? It's a corpse." This has led to an expensive hash war in which each chain is trying to outspend the other in terms of hashpower until one of them runs out of money. This has led some to speculate that some large players are selling their BTC reserves in order to fund their mining activities, creating downward pressure on prices that has resulted in the most recent downturn. For others the effect of the BCH hard fork on market prices is a less direct one, and has more to do with the resulting uncertainty at a time when there's already pressure on ICOs from SEC enforcement. For those less invested in crypto, now simply doesn't feel like a good time to deploy one's capital within the space. So, ICOs selling their ETH reserves probably isn't causing the recent price drops but the Bitcoin Cash hard fork may well be.  The third narrative we'll examine relates to the wider macro-economic picture. When one takes a step back from crypto to look at the broader picture, it becomes clearer that the current bear market may have little to do with crypto at all. The US and China are entering a lose-lose trade war, tech stocks are down 20-40% from their all time highs and many analysts are warning of impending debt crises.  From the depths of the financial crisis in 2008 to late-summer of 2018 represented the longest bull run in the stock market ever seen. Events within the crypto community can move the needle and determine exact timing of price moves, however, the broader macroeconomic context has a far larger effect. Returning to Meltem Demirors for a moment for an explanation of the wider investment context: "We are starting to see the fraying around the edges of the global investment community. Blackrock, the world’s largest asset manager with $6.4 trillion in AUM, just experienced its first quarter of net outflows in three years." With that being the case, it's likely that the bear market continues for some time. Things could get worse before they get better. Investors must stay focused on the long term vision for the space, and stay tuned with Cryptonomos to keep on top of the latest developments!

Articles/November 22, 2018

The Best ICO Opportunities – Coming Soon

Token sales in the first nine months of 2018 have hit $12.3 billion. That's over double the capital raised in 2017 - $5.6 billion - according to a report from Fabric Ventures. The ICO phenomenon, as well as the volatility within the wider cryptoasset market, have provided unprecedented opportunities for investors over the last year. These investors now want to know what the outlook is for the next 12 months and beyond. Although it may appear at first glance that the ICO market is continuing to march ahead, the fact is that the vast majority of the capital raised in 2018 was actually raised in the first 5 months alone. Since then, things have tailed off considerably. Note: $billion Chart above pulled from https://www.fabric.vc/report So, is the ICO phenomenon over? Should we all pack up and go home? Should we be looking elsewhere to fill the high-risk, high-return section of our portfolios? No. On the contrary, the 2018 market slowdown is part of a necessary and healthy cycle. The ICO market became way overheated in early 2018 - too many scams, too many poor projects - such that even the good ones were arguably raising far too much capital. Market downturns flush out the bad actors while the best projects get down to building. They also give regulators, many of whom have taken a largely positive stance towards crypto so far, a chance to 'catch up' in order to provide more regulatory clarity to the space. The cyclical nature of markets means that, while the bull market of 2017 and early 2018 is over, it won't be the last one we see in crypto. And while most previous bull markets largely involved one asset - Bitcoin - 2017 established crypto as a whole asset class.  Moreover, ICOs will return with greater legitimacy and investor security, providing more opportunities for investors. Those who invested early in the ICO boom last time saw unprecedented returns. Next time around it's unlikely that we'll see returns on the same scale as say, Ethereum - 66,492% from its ICO in 2014 to 5th November 2018 - but it's very possible that the capital allocated by investors who spot the bear market reversal early and invest accordingly will far outperform that invested in many other asset classes. ICO investors should make investments according to careful consideration of the likelihood of a project's success, however, it'd be foolish to overlook market timing in a space as volatile as crypto. Mainstream eyes were not on ICOs in early 2017, but certainly turned towards them later on, which introduced a lot of new capital and saw many token prices rise astronomically. Later in the boom, ICOs were selling tokens at prices which rendered it harder to achieve ROI on a short timescale. In other words, ICO projects began to capture more of the value than investors.   People shouldn't be investing in ICOs if they don't believe they can last more than one market cycle, but it makes sense to invest in ICOs when there's still runway left in the bull market, in case we see a similar level of over-exuberance and people want to sell their tokens before buying in again. All this to say, market timing is important, and should form a key part of one's decision to invest in an ICO. Getting in ahead of the last ICO boom would've been lucrative, so many investors want to try to predict when the next one might be coming. The Next Bull Market - Three Key Indicators BTC Price - A Decisive Break Upwards It's well-known that the crypto asset class as a whole moves up and down in line with the price of Bitcoin. If there's only one indicator you follow on the health of the market, let it be this one. BTC price has declined around 68% from the top of the bull market but has seen little volatility recently, with some expecting it to go lower still. A decisive break up above $7000 would be a bullish signal, but those who're looking for ICO opportunities needn't worry about following it too closely. A decisive break upwards for BTC should merely be a signal to begin to build capital ready to invest in decent ICOs once the market begins to warm up. To educate oneself about market timing, investors should keep up on Twitter and YouTube with the following people, who've established some credibility for their market-leading predictions over the last 10-12 months: @nasirjones007, @wavesix18, @swenlink, @cryptoamd, @crediblecrypto, @friendscallmeap.   Clearer Regulatory Picture - Meaningful SEC Developments Regulators are still grappling with the implications of the ICO boom of 2017. In the meantime, many potential ICO projects are wary of conducting one right now as they don't want to fall foul of new or existing regulation.  Cryptonomos' very own @Cryptonovich continues to explore the attitudes of different jurisdictions here on the Cryptonomos blog, many of which have been fairly positive. Another ICO boom is probably dependent on regulators providing clarity as to what exactly projects can and can not do and say. In the meantime they're fairly hamstrung. So, stay tuned with Cryptonomos and keep an eye on developments from the SEC - the US Securities and Exchange Commission will probably set the tone globally, so it's important to keep up to date on what they're doing and saying. Reversal of trend towards private presales The prevalence of private presales - ICOs completely selling out among accredited investors before ever releasing their tokens to the public - is arguably a sign of dysfunction in the ICO market.  For a time this was happening because people were wary of regulation around what they could and could not sell to retail investors. Others wanted to create hype by 'selling out of tokens' in their private presale, in order to sell their own tokens at a higher price once they hit exchanges. One of the functions of an ICO should be to achieve a wide initial token distribution, but private presales achieve the opposite of this - centralizing token distribution in the hands of a small number of wealthy investors. More ICOs being open to the public is a bullish signal in itself, and a sign of a healthier market. A healthier ICO market will be one with real sustainability as a funding mechanism, so investors should keep their eyes open for a reversal of this trend. Conclusion The ICO market is cooling down, which means limited opportunities for investors within crypto. However, the ICO phenomenon is here to stay. The cyclical nature of markets means that the ICO investors who achieve the best return will be those who spot the bear market reversal early and invest in the ICO space when there's still plenty runway left in the next bull market. Keep learning and stay tuned with Cryptonomos!

Articles/November 15, 2018

How did Belarus Become a Crypto-Friendly Jurisdiction?

You missed the recent interesting developments relating to crypto-friendly countries, didn’t you? As promised, this article will plunge into the adventure that is the world of crypto to explore why blockchain investors should mark Belarus on their ‘expansion maps’ and why the country looks set to capture first position in the list of the most attractive crypto harbours. So, how has Belarus been turned into a progressive ‘crypto-valley’? It all started with a decree which legalized crypto, ICOs, and smart contracts, signed by the President of Belarus, Alexander Lukashenko, in January, 2018.  The President, who is, by the way, known for his strict policies and has for years been disparagingly named ‘Europe’s last dictator’, believes that digitalization could be the key to the country’s future economic development: “We must adopt a new digital reality, and make the most of all the opportunities that it opens up for Belarus. The digital transformation of the economy is one of the key priorities for the development of our country. Belarus will become the first government in the world that opens wide opportunities for the use of blockchain technology. We have every chance of becoming a regional center in this area” What does a decree imply? Having come into force in March, the decree provides Belarusian High-Tech Park (HTP) residents with special benefits. According to Tut By Media, one of the country’s most prominent news outlets, ‘this comprehensive legal regulation is proposed so that HTP residents can provide crypto exchange services, attract financing through ICOs, and use cryptocurrencies and tokens in civil circulation’. Furthermore, all income from crypto transactions, mining and related areas will be tax free for 5 years — until January 1st, 2023. As stated in the above-mentioned ‘crypto-decree’, foreign investors can own up to 100 percent of an HTP-resident company. Interestingly, foreign individuals who are employees or founders of an HTP-based company do not need to obtain a visa or work permit to become an HTP resident. Most importantly, thanks to this unprecedented decree, Belarus has become one of the first countries to declare smart contracts as a fully official document. How did the community react to the new legislation? The reaction was instantaneous. Interest in blockchain and crypto in Belarus has spiked and numerous foreign initiators of crypto-based projects, including Jinbi, TwoGnation, and more have officially approached Belarusian entities to expand their operations to this market. The decree also entailed a huge recovery in the IT sector. According to statistics by Belarusfeed, after the Decree was signed the number of HTP residents increased by 25 percent. In just a couple of months 88 companies received the status of residents The hype around crypto in the country has not passed under the radar of more traditional financial institutions either. Belarus-based Mtbankfx, an accredited FX dealer and the first Forex-like banking platform in Belarus, has started offering bitcoin contract-for-difference (CFD) in collaboration with Swiss Dukascopy Bank SA. Drawing a line However, Belarus’ government is now getting tougher on crypto, signaling that it wants crypto holders and investors to be identified similar to the way they are through typical AML and KYC procedures elsewhere. Still, the aforementioned decree sends a powerful message that on the whole, the country’s goals and attitudes are friendly to new forms of businesses. This new decree looks set to benefit not just crypto but the IT sector too. Belarus plans to increase the number of employees in the IT sector from current 30.000 to more than 100,000 by 2030. Export revenues should grow up to $4.7 bln, tax revenues are expected to increase to $10 bln and foreign investments are to go up from $0.8 to $4 bln. It’s not surprising that the country’s authorities want to digitalize the economy. Squeezed between Russia and the European Union, mired in obsolete traditions and weighed down by bureaucracy and inefficient state-owned enterprises, Belarus is reappraising its approach. Judging by government’s actions, Belarus is now on the right track. The crypto community has also positively reacted to the move, and many are hoping that continued crypto-friendly legislation will lead Belarus towards becoming a first-choice consideration, for crypto development.

Articles/August 28, 2018

How to Detect Scam ICOs and not to Lose Money

Every day Cryptonomos platform receives up to seven applications from startups that want to hold their ICO on our marketplace. But we choose only one project every few weeks: we help to raise money only trusted projects with a good product. And we also do our best to help our clients to avoid losing their money. We understand that the ICO market is still unregulated. We are all in the same boat, token buyers, ICO initiators and marketplaces that help to hold ICOs. We all want to have equal playing field with definite rules and guarantees against fraud. However, the ICO market is still far away from being transparent for investors, and scam projects are far from being rare on it. Around $600 million has been raised through fraudulent schemes, the US Security and Exchange Commission (SEC) estimates. Soon we might hear even bigger numbers: in May the US and Canada launched a coordinated operation to investigate suspicious cryptocurrency investment schemes. 70 investigations are already underway, media say, and more are to come. This widespread crackdown is called Operation Crypto Sweep. And a few days ago Bloomberg reported that the Federal Bureau of Investigation has 130 cases tied to cryptocurrencies.  That is why we decided to share with you some rules that help not to become victim of fraud. Here is a list of red flags that often help to detect scam ICOs. Following these recommendations you will be able protect your money from fraudsters and concentrate on opportunities to earn some money. We hope it should not come as a surprise, but chances of losing money in a scam ICO decrease dramatically, if one buys tokens not on one’s own, but through a trusted market places with KYC (Know Your Customer) procedure. Cryptonomos is one of such platforms, but not the only one. However, if you are brave enough to buy tokens on your own, beware that if an ICO project promises returns, especially high returns, it’s a sure sign that the project is scam. Nobody but the God of the Market can say, if the ICO segment will be growing or not. Most of projects that promise high returns are nothing, but Ponzi schemes. Check the documents. The Wall Street Journal recently conducted a review of 1,450 coin offering documents and found that hundreds of technology firms were using deceptive and even fraudulent tactics, including plagiarized investor documents. Always ask for the White Paper and Terms of the Token Sale at least and check them for plagiarism. Do not trust ICO projects endorsed by too many, or unlikely, celebrities. Beware that some fraudulent projects use fake biographies of executives and advisers. Some scam ICO sites have even used the unauthorised images of celebrities such as Prince Charles and Jennifer Aniston to sell their tokens. On the other hand, if executives and co-founders of the project prefer to remain anonymous, it is just as bad. They are not the Count of Monte Cristo, ICO projects should be transparent. Do not be lured into buying tokens, if the company that is holding the ICO is boasting partnership with many prominent corporations. Recently, the SEC charged Sohrab Sharma and Robert Farkas - co-founders of Centra Tech. Inc. - with carrying out a fraudulent ICO. Centra offered CTR tokens to investors, which co-founders claimed were backed by Visa and Mastercard and would allow people to convert cryptocurrency to U.S. dollars in order to spend it in stores. In fact, Centra had no relationship with either company. Do not trust projects that do not have a product that will find demand on the market. Or even worse, projects that do not have a product at all. Have you heard of the Useless Ethereum Token (UET)? It was created as a joke, do not forget that some crypto-enthusiasts have a very specific sense of humor. Study the roadmap of the project. If it is confusing, or sets too optimistic goals, better stay aside. No media coverage, or very generous media coverage is a bad sign. Visit the projects that conducted their ICOs on the Cryptonomos platform. At the bottom of their page you will always see what publications wrote about them. All credible ICO projects have sensible media budgets and do appear in many publications. The credible ICO project always has an official website, and all its content is translated into several languages, including, for example, Russian and Asian languages (once again, come and see how Cryptonomos does it). The project should also be present in the social media. The content is usually doubled: by the startup itself and by the marketplace that helps it to raise money. We hope that the list is complete. But we promise to update it if some new information emerges about potential threat to token buyers.

Articles/August 17, 2018