Week in Review: “Defining” Moments in Cryptocurrencies
While Japan has been cracking down more on cryptocurrency exchanges recently, we see the state of Wyoming opening things up to make the state more attractive to the technology. At the same time, the SEC defined ICOs as money transmitters and crypto exchanges as money exchange businesses. It is rapidly becoming easier to run afoul of these quickly changing clarifications and find yourself in hot water.
On the lighter side, words such as “cryptocurrency,” “blockchain” and “ICO” are joining “Bitcoin” in the dictionary as officially recognized and defined words.
Featured stories by Amy Castor, Michael Scott, Jay Derenthal and Aaron van Wirdum
Japan is cracking down hard on cryptocurrency exchanges, having just recently penalized seven of them and requiring two to halt operations for one month. Japan’s Financial Services Agency (FSA) announced on March 8, 2018, that it came down on the exchanges due to their failure to provide proper internal control systems. All of the exchanges were ordered to step up efforts to improve security and prevent money laundering.
Of the seven, Coincheck was served with its second business improvement order since the $530 million breach of NEM (XEM) were stolen from it earlier this year. All of the 260,000 users impacted by the theft will be paid back in Japanese yen, based on NEM rates at the time of the theft, the Tokyo-based company said.
In the latest regulatory backlash against ICOs, the SEC has decided that, effectively, anyone who sells tokens is an unregistered money transfer business and anyone issuing an ICO is a money transmitter that is subject to the Bank Secrecy Act. Exchanges also qualify as money services businesses (MSBs) according to FinCEN.
An ICO registered as a security, however, would not be considered a money transmitter. Anyone failing to register with FinCEN and failing to perform KYC AML compliance obligations could face prison under a felony conviction. Employees and investors of ICO companies could be held criminally liable as well.
Wyoming has followed through on HB 70 by a vote of 23–7 and the bill is being sent to the state’s governor for signature. Through this legislation, lawmakers hope to carve out space for tech developers involved in the creation of what are known as “utility tokens.” The exemption would be directed at those utility tokens which are not marketed or promoted as investments and are able to be exchanged for goods and services. The bitcoin-friendly HB 19 is also currently working its way through the Wyoming legislature in an effort to exempt cryptocurrencies from the state’s money transmission laws.
AsicBoost was invented by former CoinTerra CTO Timo Hanke in 2016. The technology takes advantage of a quirk in Bitcoin’s proof-of-work algorithm, which lets miners take a sort of “shortcut” to find a new block. This can be done both overtly as well as covertly.
“Unlike covert forms of merkle grinding, [overt AsicBoost] has no incentives to create smaller blocks, nor does it interfere with upgrades to the Bitcoin protocol,” Halong Mining writes.
While a patent controversy swirled around AsicBoost in the past, the open sourcing of it to BDPL members negates much of that. The feature should allow for a 20 percent improvement in energy efficiency in the DragonMint hardware.
In further signs of the mainstreaming of cryptocurrencies and blockchain technology, those terms as well as “initial coin offering” have been added to the Merriam-Webster Dictionary. The March 5, 2018, announcement included 850 new words, which included these three.
Emily Brewster, associate editor at Merriam-Webster, stated, “In order for a word to be added to the dictionary it must have widespread, sustained and meaningful use. These new words have been added to the dictionary because they have become established members of the English language and are terms people are likely to encounter.” The addition to the Merriam-Webster dictionary of the words cryptocurrency, blockchain and ICO seem to fit those criteria well.