Craig Wright CC Forum duel ends in shouting and pumpkins

The CC Forum on blockchain, AI and digital innovations, with its many panels and duels of differently opinionated experts, was bound to have some fireworks. The duel between Dr. Craig Wright, inventor of Bitcoin, and Mike Beaver, macro economist and global growth investor, paid off with many explosive moments and testy exchanges.

Hosted by Eric Van Der Kleij, CEO of the Frontier Network, the duel titled “Bitcoin does not have any real value, or does it?” started off with an explanation from Beaver that he is not a cyberforensic auditor, as Dr. Wright once was, but a chartered financial analyst, “looking at this from a financial, economic and strategy, and bigger picture perspectives.” He only promised to argue based on a valuation of Bitcoin, and not any technical perspectives.

Beaver began by knocking down several perspectives that would lend value to Bitcoin. It’s not backed by an asset and it has no value. Van Der Kleij asked if you could assess a value from user confidence, to which Wright immediately replied no, and Beaver said it would be very hard to prove one. So finally, Beaver said the best bet is to look at the business angle, technology angle and regulatory angle, to which Wright said, “He’s fine.”

Wright then redefined the argument, noting that the commonly accepted concept of Bitcoin is flawed. It can be seized, he noted, and he created Bitcoin to create “honest records”. Ultimately, it will create a system of microtransaction rewards that will improve the services we use.

Van Der Kleij, seemingly stepping into the duel himself, after he said: “But Craig, that’s more about the utility of Bitcoin rather than the value.”

Craig responded: “That is what it is. That is value, utility. Tell me if I’m wrong, utility is value. Goods and services, things people want to use, is value. Money is not value. Money is not wealth. You have been lied to. There is no great wealth creation because of new shitcoins. Money is not wealth. Goods and services are wealth.”

At that point, the differing views of what value means in the world of Bitcoin really became apparent, as the duel broke down. While Beaver wanted to focus on the value of Bitcoin, and price of it, Wright preferred to talk about why exchanges like Binance, because of their alleged money laundering practices, are no threat to Bitcoin due to the increasing regulations in the world. He also returned to why micropayments make Bitcoin valuable.

That wasn’t the topic Beaver wanted to discuss though, as he kept returning to the risks to the price of Bitcoin. When again pressed on the topic, Dr. Wright noted that he himself was a risk, due to his massive holdings in Bitcoin. Finally, Wright tried to put a nail in the topic:

I don’t care. That simple. I’ve got a great company, with a great team, we’re expanding, we’re setting up new offices. Investment wise, I don’t need to do anything. People throw money at us if we want it. We’re not actually taking any and they keep offering it. People want us to do an IPO at nChain. Why? Because we have fucking patents.

It was at that point that the crowd started getting into it, as Petur Georgesson, managing partner at Capital Sniper Investments, asked how much the price of BTC might decline by this time in 2020. After commenting that he didn’t care, because he’s more focused on building things, he offered that 90% of the price of BTC might fade away.

At that point, the split between BTC and BSV became the topic, as Mike Beaver wanted to continue discussing the risks to BTC from other cryptocurrencies, insisting that was the topic, while Dr. Wright pointed out that Bitcoin is Bitcoin SV (BSV). But to answer the core question, he responded that BSV is protected from the competition by his armor of patents.

That confused Beaver, who then bemoaned:

So Craig wants us to talk about this whole topic of debate, the value of BSV. We were talking about the value of BTC, now we’re talking about the value of BSV, well why not the other 3000 coins. There’s a lot of interesting and talented developers there, sooner or later, we know one thing with technology, it only ever, in the long term, improves.

Wright then expanded on how the patents he’s been working on will keep BSV at the top of the pile, noting that any other crypto hoping to use the technology he’s built will have to pay for the right to do so, while BSV will be subsidized.

The debate continued in the manner for a few more minutes, with Beaver focusing on the competition raised by competitors to BSV and Wright repeatedly slapping them down with patents that already protect them from serious harm.

Seeking to change the tone, Van Der Kleij opened it up to the crowd to ask questions. Sir Toshi, noted BSV enthusiast, asked Beaver about LTC, which Beaver entirely ignored to return to his line of questioning and instead asked about how regulations might threaten various cryptocurrencies. While Beaver perceived this as a threat to the industry, Wright noted that he welcomes regulation to squash cryptos that don’t follow the law.

Wright was then asked by a member of the crowd why he didn’t patent Bitcoin when he first invented it. Wright responded that, in 2008, he didn’t believe it was possible to patent the technology. Also, he published it under the pseudonym Satoshi Nakamoto, and thought he couldn’t patent Bitcoin if he used an alias.

When asked if his patent library could prevent future innovation, Wright responded that it’s proven that by patenting technology, you not only protect it from copy cats, but you encourage others to recreate a piece of technology with the same purpose but by a different method, thus spurring innovation.

Beaver then disputed Wright’s point that patents would protect Bitcoin from competitors going forward, noting that patents expire and would eventually allow for someone else to create a better version of the technology. The discussion didn’t go very far though, as it was interrupted by none other than Tone Vays.

It was at this point that the duel produced the moments it will forever be remembered by. Tone Vays, recalling the moment in the previous fireside chat where Wright suggested that his university papers prove he was Satoshi, or was plagiarized by Satoshi, Vays preferred to go with the latter suggestion, and suggested that the crowd should not consider Wright relevant to the topic of Bitcoin as a result, suggesting Craig Wright is a fraud.

Wright responded:

It doesn’t matter what your vacuous ideas are. It doesn’t matter whether you like my patents. It doesn’t matter whether you like nChain. In five years’ time, when we have another 1000 patents granted, and we have IBM, and we have Microsoft, and we have Apple, and we have Google, and we have all these companies paying us money, you can choose not to have anything to do with me. The same way you can chose not to have anything to do with the internet.

That was too much for one woman in the crowd, who yelled out: “That’s exactly what you want. You are a mole, trying to crash Bitcoin. Farmer Craig. Pumpkin man Craig. Go back to your farm, your pumpkins and your tomatoes and grow a superfarm.”

That’s when the duel totally fell apart. Wright responded that she’d just have to live with his invention. Tone Vays, still holding the microphone in the crowd, suggested Wright would be in jail in the next couple of years, Georgesson yelled from the other side of the crowd that he really wanted to hear a discussion on valuation still, and Beaver begged to make a final point about traceability.

As the duel finally reached a new semblance of decorum, Beaver commented that if blockchain technology truly guarantees traceability for every transaction, there is no value created by a notion of anonymity, ruining a selling point of BTC adherents. Wright flat out agreed.

Van Der Kleij noted that time had ran out on the duel and sought to bring an end to it. It didn’t end easily though, as the woman in the crowd once again began yelling at Wright, who responded to her as Beaver begged to make a final point about the declining value of an asset through use and surplus.

Craig Wright on nChain patents, pumpkin farming disaster at CC Forum

Dr. Craig Wright is no stranger to fireside chats, having previously sat down with Bitcoin Association Founding President Jimmy Nguyen to discuss the history of Bitcoin’s creation. To discuss the larger world of cryptocurrency, he recently sat down with the CEO of the Frontier Network, Eric Van Der Kleij, at the CC Forum on Blockchain, AI and Digital Innovation.

Van Der Kleij was quick to point out that the CC Forum wasn’t afraid about hearing Dr. Wright’s side of the truth, and asked what nChain has been up to. After covering how he came to nChain from his Bitcoin exile, Wright noted that nChain has been very busy patenting his innovations, with 826 currently filed, 1450 in the pipline, and approximately 200 granted or about to be.

When asked what Dr. Wright wants to do with these patents, he responded “Choose how the industry moves.” Van Der Kleij wondered if this might prevent others from using the innovations, to which Wright noted “They can do what they want, as long as they pay licensing fees.”

Once again pressed if this might prevent others from innovating on blockchain technology, Wright quipped “Do I care?” Once Van Der Kleij accepted that answer, Wright explained:
Stifle creativity? What creativity? We have STOs running around saying that they’re new because they’re a token. So what? Wealth isn’t money. Wealth is the creation of goods, services, assets, capital. Because you’ve created a token, so what? That just makes you another scammy loser. If you create a token, and you don’t have a business, you don’t have anything. You’ve got Tone Vays over there, that’s it. Empty, vacuous.”

Changing topic, Van Der Kleij then tried to turn the discussion to Dr. Wright’s ongoing legal battle in Florida, but Wright refused, noting that reporting and crypto twitter speculation has been far off base. “I’ve used toilet paper with more accuracy.”

Van Der Kleij then turned to Bitcoin’s intent to follow the law from the start, which Wright explained:

It’s intended to work in the law. The last sentence says ‘will follow rules.’ Rules include law. The difference between a rule and law is, law is a rule with a consequence. It is a subset of the word. And miners don’t create rules, they enforce rules. I keep stressing this, I’m going to start buying copies of the Oxford and Cambridge dictionary for people so that they can actually read the whitepaper and understand what these words mean.

On that note, he was asked about John McAfee’s new decentralized exchange, which lacks know your customer (KYC) protocols and opens it up to terrorist financing. “And Mr. McAfee, like everyone else, will eventually get caught,” Wright responded. “Blockchain is an immutable evidence trail. It is utterly traceable. It is the opposite of what everyone’s been running around. It is private, but not anonymous. Those records are admissible.”

On that note, Van Der Kleij noted that while he might not have total belief in Dr. Wright’s identity as Satoshi, he agrees with him on so much, but he wants to have more proof of his claims. “You don’t prove anything by moving a coin,” Wright responded. “The university still has my thesis from 2008. They still have my proposal. So I guess on that one alone, you can make the decision when it comes out, which it will.”

That led to a comment which would later prove to be explosive. “You can make the decision: did Satoshi plagiarize me? Because there are sections of the whitepaper, whole paragraphs, in some of my work.” Van Der Kleij was first baffled by the comment, and Tone Vays would later question if Wright was admitting to not be Satoshi, although the intent of the comment is clearly that Dr. Craig Wright is Satoshi, if not for another leap in logic to reach a different conclusion. “You can make the choice, I don’t really care,” Wright concluded.

Ultimately, when asked if Wright cares if his integrity is called into question, he responded that he really doesn’t. As nChain has already cornered the market on blockchain patents, big businesses like Wal-Mart will ultimately be forced to come to Dr. Wright for the technology they need. Van Der Kleij suggested that the world might be more accepting of Dr. Wright if he would prove his integrity. Wright railed back:

“So what you’re saying is, ‘you don’t do my way, that’s not integrity. We want this. We demand you do this. We want Bitcoin to be this way. [Van Der Keij interrupts ‘No, suggest’]. No, demand. It’s demand. You want me to be what you want me to be. So therefore…”

Concluding the discussion of Bitcoin and Dr. Wright’s history, Van Der Keij finally worried that Dr. Wright might be forcing his way on the world of blockchain. “It’s my invention, invent something else,” Wright retorted, rousing applause from a section of the crowd.

What came next might be the part that has received the most attention from the fireside chat, as Van Der Keij tried to lighten the mood by asking about Dr. Wright’s gardening habits, asking him about his tomato garden. “I actually used to have bonsai trees as well, and they’re all dead now,” he started. “I had some really good old bonsai trees, and bloody nChain and all the travel I have to do, every single one of them is dead. My tomatoes, they keep bursting and things like that, because I’m not there to do things. And the gardener sucks, because the last time, he actually mowed by pumpkins.”

“That’s probably not advisable,” Van Der Keij concluded.

Craig Wright’s week at CC Forum, Angelina Lazar and Pumpkin mania

Dr. Craig Wright attended the CC Forum on blockchain, AI and digital innovations between October 14 and 16, speaking on panels and dueling other panelists. It was a big event if you enjoy differing point of views debating the hot technological topics of our time, and one we’d like to take a look back on, with special attention to the viral moment of the week—Dr. Wright’s pumpkin farming.

Finding common ground with a crypto skeptic

The first item on the agenda to feature Dr. Wright, the inventor of Bitcoin, was the panel named “The Global Centralised Financial System: What are the flaws & challenges and what are the possible solutions?” This panel featured top speakers from every corner of the digital asset world. Dr. Craig Wright spoke for Bitcoin SV (BSV), Tone Vays argued exclusively for BTC, Bobby Lee and Brock Pierce were on the side of cryptocurrency in general, while Nouriel Roubini was the crypto skeptic.

Compared to other events on the agenda, this panel went fairly well. Wright and Vays clashed lightly on BTC’s development strategy and the real Bitcoin and Nouriel criticized shitcoins, finding a lot of common ground with Wright while irritating Lee.

Explaining nChain’s patent strategy

Wright’s next turn at the conference came during a fireside chat with CEO of the Frontier Network, Eric Van Der Kleij. The two covered a wide range of topics, but spending a lot of time discussing nChain’s strategy of patenting Dr. Wright’s Bitcoin innovations, regulation in the crypto industry, and the perception of Wright in the wider cryptocurrency world.

Particularly when Wright’s integrity came into question, the chat got slightly antagonistic. Van Der Kleij chose to end on a question of Dr. Wright’s farming habits; a topic that would come up in the next item on the conference agenda. Wright responded:

My tomatoes, they keep bursting and things like that, because I’m not there to do things. And the gardener sucks, because the last time, he actually mowed by pumpkins.

A duel on Bitcoin’s value

As that event ended, Van Der Kleij immediately invited Mike Beaver on stage for a duel with Dr. Craig Wright on “Bitcoin does not have any real value, or does it?” The two immediately proved to have problems seeing eye to eye, not finding common ground on the definition of what real value is, what the real Bitcoin is, and how much nChain’s patents will protect BSV from future threats. Wright bristled at that notion, saying:

I don’t care. That simple. I’ve got a great company, with a great team, we’re expanding, we’re setting up new offices. Investment wise, I don’t need to do anything. People throw money at us if we want it. We’re not actually taking any and they keep offering it. People want us to do an IPO at nChain. Why? Because we have fucking patents.

The debate totally unraveled when the audience was invited to question the duelists, as Angelina Lazar lost her composure after Wright suggested BTC would be doomed to fail.

Who is Angelina Lazar?

Most coverage of Angelina Lazar you can find online refers to a past of running a Ponzi scheme through the Charismatic Exchange company between 2005 and 2007, which took minimum deposits of $20,000 and promised 20% returns. She pleaded guilty to running a fraudulent investment scheme and was deported to her home country of Canada for her trouble.

More recently, she was a promoter of OneCoin for a period of time, calling it “the single most lucrative business and investment opportunity of a lifetime and in all history.” At some point, that opinion changed and she turned against the outfit, accusing them of being a scam and attempting to have her arrested for speaking out.

She now appears to be firmly in the camp of BTC, writing on Twitter “PEOPLE OF THE WORLD: BITCOIN TO THE END OF TIME! They’re tryin’ to CRASH & REPLACE IT with THEIR ONE WORLD CURRENCY! ARE SO THREATNED [sic] BY BTC!”

Since gaining viral fame, she hasn’t been shy to spar with BSV supporters, often going into capslock rants about rabbit-hole conspiracy theories, “ROGUE FBI agents,” and pointing out Satan’s work where she sees it.

This appears to be just a passing moment for her though, as once she’s free of the deep state and globalist conspiracy’s clutches, she plans to continue her crusade against OneCoin.

Pumpkin Mania

As fascinating as Angelina Lazar is, her lasting legacy from the CC Forum will likely be for inspiring the current pumpkin fascination in the BSV community.

Her message to Dr. Wright to go back to his pumpkins has been fully embraced by everyone in the BSV industry, with everyone giving their best effort to get in on the fun.

Some prefer to go right at the woman who inspired the moment:

Others have tried their hand at photoshopping:

It wouldn’t be a viral moment without a great gif:

And demonstrating he’s not above having some fun with the moment, Dr. Wright has joined in too.

If you want to see some of the best memes of the moment, check out Bitcoin Association Founding President Jimmy Nguyen’s Twitter thread on the topic. If you want to relive Dr. Craig Wright’s week at the CC Forum, check out our YouTube playlist.

BitcoinFiles: An awesome way to share digital content via BSV

The introduction of cryptocurrency and blockchain has spawned an entirely new way to do business. The power of blockchain technology is seemingly endless, with a myriad of potential applications and solutions that are able to revolutionize how companies operate and share information. Even beyond that, though, there are everyday practical solutions for individuals, as well, and one of the most noticeable is BitcoinFiles. It has proven to be an amazing way to store and share data and is made possible because of the Bitcoin SV (BSV) blockchain.

BitcoinFiles lets anyone store and share virtually any type of content—images, files, documents—right on the blockchain. This means that, even 100 years from now, that same data will be right there, ready to be viewed to anyone who has access. No data loss, no data corruption, no possible way for the information to be changed.

Once on the site, uploading the information is a piece of cake. Select the type of file—image, text, HTML, JavaScript, etc.—and then upload it. Uploading requires a link to a MoneyButton BSV wallet, but this is simply to ensure the integrity of the data. After that, record the hash code and you’re all done.

Any type of data can be uploaded and stored, but this doesn’t mean that there aren’t procedures in place to ensure the data is legitimate and legal. BitcoinFiles records IP addresses and the BSV community has already shown what happens when someone tries to store illegal content.

It isn’t even necessary to visit the website in order to upload information. The minds behind the project have created an application that allows the functionality to be integrated into other platforms, such as a website, so that data can be uploaded to and stored on the BSV blockchain from anywhere. With the virtually unlimited scaling possibilities of BSV, this means that even the most robust websites could be completely built and maintained right on the blockchain.

It took the public about 15 years to get used to the idea of email after it was invented. It has only taken about two for blockchain’s potential to begin to be realized. Applications like BitcoinFiles are helping to facilitate the next wave of innovative solutions and it’s amazing to try to envision where we’ll be even as soon as five years from now.

Facebook Libra remains positive with boost from Taiwan

This past Monday saw 21 companies, down from the original 28 after several walked away, sign the charter to be founder members of Facebook’s Libra stablecoin project. It was a means for the social media giant to assert that it has no plans of backing down, despite overwhelming opposition to Libra, and support out of Taiwan has given Facebook more optimism and energy to keep pushing forward. Whether or not that push is successful won’t be ascertained until sometime next year.

The Libra Association will reportedly guide the way for the social media’s financial solution but, quizzically, not a single financial institution has signed up to be involved. That’s no big deal, asserts Facebook, as it asserts that it is “confident” another 100 members will join the group. In an interview with CNBC, Libra Association Chief Operating Officer and Interim Managing Director Bertrand Perez said some of those who are interested include “banking and financial institutions,” although no names have been provided.

Perez added that the entities will be disclosed over the next couple of months and that a delay in Libra’s launch is almost a guarantee as the company works to show that it can comply with financial transaction regulations in different countries. He rationalized the delay, stating, “With such a big project and the vision that we’re having, launching a few quarters later or before makes no real change.”

What might make a change is support coming from the richest man in Taiwan. Terry Gou, the founder of the Foxconn manufacturing behemoth, believes in Facebook and in the Libra project. He wants Taiwan to fully embrace the stablecoin and even suggests that it could ultimately be tied to China’s own state-backed digital currency if the two are ever launched.

Earlier this month, Gou appeared at a meeting of Taiwan’s tech leaders where he openly showed his support for Libra. He said at the time, “I know [Facebook CEO Mark] Zuckerberg pretty well, and I hope we can bring Libra to Taiwan in the future. Mainland China has decided not to accept Libra and build its own digital currency. That creates a great opportunity for Taiwan as we can become a place where the two separate systems converge.”

The man who wanted to become Taiwan’s next president in 2020 before dropping out of the race in September has a lot of influence across the globe, thanks to a net worth of $6.7 billion. He has already helped bridge the gap between the country’s tech space and crypto by facilitating several projects, but he still may not have enough pull to change the minds of several world leaders, including those of the U.S., Germany, and France, who are firmly opposed to Libra.

Malicious code hiding in WAV audio can mine crypto

Security researchers have discovered a new campaign by cybercriminals that’s hiding cryptojacking malware in WAV audio files. This comes just days after the first cryptojacking worm, known as Graboid, was discovered by another group of security experts, indicating just how rapidly the tactics are shifting. In this new campaign, the criminals were reportedly weaving in a loader component for decoding and executing malicious content throughout the file’s audio data.

This new campaign was discovered by Cylance, a California-based subsidiary of BlackBerry that develops antivirus programs. In a blog post, the researchers revealed that some of the WAV files contain code associated with the XMRig Monero CPU miner. Others contained Metasploit code used to establish a reverse shell, effectively giving the attackers unrestricted access to their victim’s machine.

The researchers stated, “Both payloads were discovered in the same environment, suggesting a two-pronged campaign to deploy malware for financial gain and establish remote access within the victim network.”

What makes the attack very difficult to detect is that embedding the malware has no effect on the quality of the files.

“When played, some of the WAV files produced music that had no discernible quality issues or glitches. Others simply generated static (white noise),” the report stated.

Even more significantly, this type of attack proves that cybercriminals can hide malware into any type of file, the researchers noted. The report noted, “These techniques demonstrate that executable content could theoretically be hidden within any file type, provided the attacker does not corrupt the structure and processing of the container format. Adopting this strategy introduces an additional layer of obfuscation because the underlying code is only revealed in memory, making detection more challenging.”

The practice of hiding malware in plain sight isn’t a new concept. However, this marks the first time that audio files have been used to spread crypto mining malware, proving just how popular cryptojacking has become.

The report concluded, “Analysis revealed that the malware authors used a combination of steganography and other encoding techniques to deobfuscate and execute code. These strategies allowed attackers to conceal their executable content, making detection a challenging task.”

As CoinGeek recently reported, security researchers from Palo Alto Networks’ Unit 42 recently discovered a new cryptojacking worm which they named Graboid. Thought to be the first of its kind, the worm uses its hosts to mine Monero while spreading to other systems.

Zdravko Loborec: Bringing blockchain efficiency to loyalty programmes

The integration of blockchain technologies into mainstream business, both as money and for data recording, continues apace. A Vancouver entrepreneur, Zdravko Loborec, is the founder of REM Loyalty, a provider of ‘off the shelf’ loyalty programmes for all kinds of business. 

REM Loyalty started in 2017 and now boasts more than 300 well-known brands that its users can spend its tokens on. It sells to businesses who want an easy and efficient way to set up a loyalty programme without having to start from scratch. 

REM’s business customers can reassure their end users that the scheme overcomes most of the drawbacks of loyalty programmes. As Zdravko explains: “The biggest problems in loyalty rewards that people complain about is that their points expire, they can’t transfer them to other people, they don’t convert to cash. Well, when you build your loyalty point actually onto the blockchain and turn it into a form of cryptocurrency, all those problems go away.” 

The company has created its own currency, the REM dollar, which is itself a cryptocurrency, but can be converted into BSV or other currencies on the company’s platform if the user chooses to redeem it. 

The other side of REM Loyalty’s relationship with blockchain is that it is used to record transactions of its token: “It’s made things a lot more efficient,” Zdravko says. 

One of the company’s clients is a Canadian property management company, RentPerks. They used REMs to reward their clients for ‘good behaviour’—things like getting a clean inspection report or paying their rent on time. But the renters can do more than that if they choose: they can use the platform to exchange BSV for REMs and use them to pay their rent. 

Another client is a travel agent, where, similarly, REM can be used to book flights and holidays. 

Zdravko says that what excites him about the business is the possibilities for new levels of efficiency: “No one likes to swipe their card and lose four or five per cent—and it happens to us all the time.” With blockchain, the charges are far lower. But what’s important to the customer is the end product, not the fact that it’s built on blockchain, because “they don’t care.” 

That message came through before the company asked its developers to “unblockchain” its apps. It was a response to clients’ confusion with earlier versions—when they were “coming back and saying ‘we don’t understand what you mean by download a wallet’ …and there was a lot more than that.”

REM Loyalty has “eight large commercial clients in various parts of the world …we’ve got deals in place with Mastercard and Visa—so in 104 countries we can already convert at any point in time up to $1000 from REM into cash at a 1% conversion rate.” The company is self-funded and has never had to raise money from outside investors. Zdravko says it has been “revenue-positive” since its first year.

Hear more from Zdravko Loborec in this week’s CoinGeek Conversation podcast:

You can also watch the podcast video on YouTube.

Please subscribe to CoinGeek Conversations – this is the fourth episode of the podcast’s second season. If you’re new to it, there are 30 episodes from season one to catch up on.

Here’s how to find them:

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Why you must rethink FATF now

This is a guest contribution by Dave Mullen-Muhr of Unbounded Capital. If you would like to submit a contribution please contact Bill Beatty for submission details. Thank you.

The Financial Action Task Force on Money Laundering, or FATF, is a G7 organized intergovernmental organization of 37 jurisdictions with the purpose of setting international standards and advisory to combat money laundering and terrorist financing. After learning more about the organization, its history, and its plans for the near future, I propose that if you are an investor with any significant investment in the crypto currency market you NEED to better understand FATF. The sooner the better.

What is the new FATF guidance?

This past June, FATF issued their recommendations to virtual asset service providers (VASPs) regarding their anti-money laundering, know-your-customer, and coutner terrorism financing (AML/KYC/CTF) guidelines. FATF defines VASPs as businesses that,

i) exchange between virtual assets and fiat currencies;
ii) exchange between one or more forms of virtual assets;
iii) transfer of virtual assets;
iv) safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets; and
v) participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset.

Because this definition clearly, perhaps explicitly, covers cryptocurrency exchanges, we saw headlines like “All Global Crypto Exchanges Must Now Share Customer Data, FATF Rules”, which is likely what initially brought FATF into most crypto currency investors’ consciousness.

The guidance recommends that exchanges “obtain and hold required and accurate originator [sender] information and required beneficiary [recipient] information and submit the information to beneficiary institutions” on all transfers valued over $1,000 USD.

Outside of the previously lightly regulated cryptocurrency ecosystem, this guidance is nothing out of the ordinary and is essentially the application of FATF’s operative guidance called the “travel rule” for traditional financial institutions towards cryptocurrency businesses.

Now that we have a sense of what guidance was issued, let’s take a look at the common misconceptions stemming from it.

Misconception 1: FATF is only issuing guidance and recommendations, they are not legally binding. They aren’t part of any governmental body with teeth.

This seems to be the predominant takeaway within the crypto ecosystem after the FATF announcement last June. It’s a perfect example of when the facts are true but the news is fake. Yes, FATF is “issuing guidance and recommendations” and no, FATF itself doesn’t have legal jurisdiction for enforcement as an offshoot of the G7. BUT, this does not mean that what they issue is not important.

On the recommendation spectrum this isn’t an “I recommend you watch this movie on Netflix” from a friend, but instead is closer to an “I recommend you step out of the car sir” from a frustrated police officer. As with an upset driver ignoring the recommendation of the latter, when a nation is not compliant with FATF recommendations they face negative consequences. Without voluntary compliance, those in charge of enforcement will opt to “do it the hard way.” With FATF the “hard way” is adding non-compliant nations to a list of “non-cooperative nations”, also known as the FATF grey and black lists.

Once added, the subsequent economic consequences for these nations can be severe. For example, in 2018 Pakistan was grey listed over concerns surrounding its inability to properly address terrorist financing. Subsequent FATF discussions over whether Pakistan should be black listed threatened them with “downgrading…by multilateral lenders like IMF, World Bank, ADB, EU and also a reduction in risk rating by Moodys, S&P and Fitch.” Countries currently grey and black listed include Pakistan, Yemen, Syria, North Korea, and Iran (among others).

While FATF recommendations are not directly related to U.S. or E.U. economic sanctions, they often coincide. FATF advises that additional counter-measures are implemented for routinely non-compliant countries such as Iran and North Korea with “serious, longstanding strategic deficiencies that have still failed to make progress after the FATF calls for enhanced due diligence,” stating that “counter-measures range from specific elements of enhanced due diligence and systematic reporting of transactions…to a limitation or prohibition of financial transactions with the jurisdiction.”

Okay, fine. Maybe being on FATF’s naughty list is bad after all. But North Korea? Isn’t that somewhat hyperbolic? It’s just cryptocurrency.

Misconception 2: Cryptocurrency represents a tiny fraction of the global financial system. We’re small fish. It won’t be a top priority.

To address this misconception you don’t need to rely on the speculation of a paranoid crypto holder or antagonistic no-coiner. FATF is very clear that cryptocurrency and virtual asset compliance is a top priority of the organization. Since FATF is an intergovernmental body, it has a rotating annual presidency between its member nations. The current (2019-2020) presiding nation is China which was preceded by the United States (2018-2019). At the onset of each leadership, the new president issues a short paper outlining their priorities and the objectives for FATF that year. Two of the four priorities outlined during the U.S. presidency’s FATF objectives directly involved crypto currency and FinTech. The section titled “Virtual Currency” reads as follows,

The U.S. Presidency will prioritise clarifying how the FATF standards apply to virtual currency providers and related businesses. Virtual currencies are increasingly being used to launder the proceeds of crime, but are not explicitly acknowledged in the FATF Recommendations…. During the U.S. Presidency, the FATF will also embark on a new project that focuses on investigative best practices on virtual currency to support law enforcement.

Likewise, China’s FATF objectives for the current year reiterate this priority in the section titled “Mitigating the Risks and Exploiting the Opportunities of New Technologies”. It reads,

Under the Chinese Presidency, the FATF will develop the methodology for countries to be assessed against the standard for virtual assets, and it will start assessing FATF members for effective compliance with it….

It’s worth mentioning that these documents outline only four priorities each, thus the respective virtual asset sections make up a significant portion of the FATF directives for that year. (If you read the extended quote from the original source you will note the optimistic tone of the potential benefits enabled via this new technology. We will expand on this optimism in part II.)

Add to this the emphasis from the United States Treasury Department (even including tweets from President Trump) again reiterating the high priority of regulating the crypto currency ecosystem. The Treasury’s Financial Crimes Enforcement Network, or FinCEN issued its own guidance this past May specifically pertaining to “business models involving convertible virtual currencies”. Shortly after its release, Sigal Mandelker, the U.S. Treasury’s Under Secretary for Terrorism and Financial Intelligence, issued remarks addressed cryptocurrency professionals at a conference stating,

…FinCEN issued guidance directly addressing areas of interest gleaned from ongoing industry engagement about how our regulations apply to different business models…I encourage you all to read it closely.

The gist of the FinCEN guidance mirrors much of what FATF issued later in June. Treasury Secretary Steve Mnuchin was quoted saying,

This (FinCEN and FATF guidance) will enable the emerging FinTech sector to stay one-step ahead of rogue regimes and sympathizers of illicit causes searching for avenues to raise and transfer funds without detection. We will not allow cryptocurrency to become the equivalent of secret numbered accounts. We will allow for proper use, but we will not tolerate the continued use for illicit activities.

Unless you think both of these organizations are bluffing, it is clear that regulating cryptocurrency businesses is a top priority for each. But how will this enforcement work in practice?

Misconception 3: Even if they wanted to enforce this stuff, they wouldn’t be able to. Cryptocurrency is decentralized.

And now we address perhaps the biggest cryptocurrency misconception of them all: “but it’s decentralized.” History has empirically demonstrated that decentralization isn’t the panacea many optimistic techno-utopians in cryptocurrency believe it to be. To explain why, we can briefly review one history (among several) of an intergovernmental take-down of an effectively decentralized virtual currency.

Liberty Reserve was a virtual currency in use from 2001 until it was shut down in 2013. It focused heavily on anonymity as it allowed users to send and receive funds with only names, email addresses, and birth dates, all of which could be blatantly faked without ever being cross checked. At its height, Liberty Reserve is estimated to have had over five million users worldwide conducting transactions worth more than US$16 billion. Although it was technically centralized in that it had founders who were eventually sentenced to prison, its network was effectively decentralized across the world via its fiat on-ramp/off-ramp “exchangers”. A New Yorker article contemporaneous to Liberty Reserve’s closure describes exchangers as,

…typically unlicensed moneymen in countries like Malaysia, Nigeria, and Vietnam, who bought Liberty Reserves in bulk from Liberty Reserve. You would pay them dollars (or whatever currency) for a certain sum of Liberty Reserves, which they would then deposit into your account.

I don’t see a substantive difference between the description of these unlicensed moneymen and the unlicensed KYC/AML-less cryptocurrency exchanges that exist today, except that the latter are far easier to locate via Google searches.

Because of its multinational and decentralized nature, Liberty Reserve was possibly more onerous to shut down than a centralized entity, but that did not stop it from happening. The United Nations’ SHERLOC database summarizes the methods by which the U.S. Federal Executive and Judiciary branches used FinCEN authorities under Section 311 of the U.S. Patriot Act to seize all known domains and assets of Liberty Reserve’s operators. Additional court documents (see: exhibit B, page 7) outline how the U.S. worked in conjunction with several other nations and “obtained seizure warrants for 28 bank accounts controlled by the Defendants, located in eight countries” as well as “issued more than 30 (legal action) requests…to more than a dozen countries.”

The language regarding the threshold required for granting authority to the U.S. Secretary of the Treasury under Section 311 of the U.S. Patriot Act would seemingly already be met by the crypto currency industry given both FinCEN and FATF’s recent statements. Section 311 “grants the Director of FinCEN the authority, upon finding that reasonable grounds exist for concluding that a foreign jurisdiction, foreign financial institution, class of transactions, or type of account is of ‘primary money laundering concern’, to require domestic financial institutions and financial agencies to take certain ‘special measures’ to address the primary money laundering concern”. These special measures include imposing “additional recordkeeping, information collection, and information reporting requirements on covered U.S. financial institutions,” similar to those outlined by FATF’s travel rule.

The United States’ FinCEN isn’t alone on explicitly confirming and extending FATF’s guidelines enforceable within their own jurisdiction. In famously banking friendly Switzerland, the Swiss Financial Market Supervisory Authority (FINMA) has issued similar guidance. FINMA’s August 2019 report, explicitly referencing FATF’s guidance, lays out how the Swiss government will be regulating crypto currency businesses within their borders to comply with new international standards. They write,

…blockchain-based business models cannot be allowed to circumvent the existing regulatory framework. This applies particularly to the rules for combating money laundering and terrorist financing, where the inherent anonymity of the blockchain presents increased risks.

Concurrent with this guidance, FINMA also announced the issuance of banking and securities licenses to two blockchain service providers, the first in Switzerland. While excitement stemming from the announcement of “institutional” blockchain players entering the Swiss market made headlines on various cryptocurrency publications, the key disclaimer that they would be held compliant to FATF’s and FINMA’s standards as part of this licensing was often underplayed.

The severe negative consequences faced by the operators of Liberty Reserve are the same types of “do it the hard way” consequences major cryptocurrency exchanges will want to avoid going forward by opting to be compliant with all the recent national and international guidance. Although the technical architecture of blockchain makes it arguably more robust than a series of registered domain names and grassroots exchangers, currently profitable and compliant businesses will not rely on that suggestion for peace of mind. Leaving the likelihood that virtually all major existing exchanges will aim to remain legally compliant with international standards like those recommended by FATF aside, how many cryptocurrency investors would want to deal with these potential legal ramifications? If a strong majority of the market is spooked, what will happen to the value of the assets?

Misconception 4: This won’t take effect for years to come and it will be implemented in each individual country differently. Not very time sensitive.

The legal reality of the precedent of successful enforcement stemming from the guidance of organizations like FATF and the U.S. Executive branch virtually ensures that companies operating within compliant jurisdictions (all non black/grey listed) will want to stay ahead of the law. To imagine that a company within a FATF compliant nation will ignore the provided guidance is woefully naive. To do so would recklessly open their business up to the threat of crippling exclusion from all existing major financial institutions as well as jail time for the individuals who operate the business. Individuals are not decentralized. Furthermore, to imagine that an otherwise compliant jurisdiction would ignore enforcement of the FATF recommendations in order to allow non-compliant crypto currency businesses to operate within their borders is even more naive. This would open up the entire country to the threat of nation state level sanctions as well as the aforementioned exclusion from existing financial institutions. This is not remotely realistic.

FATF’s June 2019 guidance stated that “the threat of criminal and terrorist misuse of virtual assets is serious and urgent, and the FATF expects all countries to take prompt action to implement the FATF Recommendations in the context of virtual asset activities and service providers.” Accordingly, they will “monitor implementation of the new requirements by countries and service providers and conduct a 12-month review in June 2020.”

Given this time sensitivity, it’s not surprising that several cryptocurrency exchanges have already responded with changes. A few weeks after the FATF guidance was released Korean exchange OKEx announced they were dropping five anonymity focused “privacy coins” within 30 days. A few days later, Korean exchange Upbit followed suit, also delisting privacy coins. Upbit cited the “decision to end trading support for the crypto-asset was also made to block the possibility of money laundering and inflow from external networks.” Continuing, “Upbit will continue to consider crypto-assets that represent anonymity functions as candidates for designation of ‘investment warning crypto-assets.’”

Preempting the most recent FATF updates, in May 2018 the Japanese cryptocurrency exchange industry group “Japan Virtual Currency Exchange Association” voluntarily agreed to delist popular privacy coins. This impacted exchanges like Coincheck which opted to comply and removed their privacy coins. Coinbase U.K. also announced this past August that they were delisting privacy focused “ZCash” for U.K. customer, though without publicly citing their reason. Surprisingly Coinbase maintained Zcash service in other jurisdictions.

While anonymity focused privacy coins are the obvious low hanging fruit, it’s a worthwhile exercise to think through how the broader industry will respond. Likewise, it’s worth deeply exploring which cryptocurrency’s technical roadmaps are heavily invested in the feature of anonymity. What about market dominance leader BTC and their layer two Lightning Network?

What does this mean?

From my vantage point, the apparent legal naivety of the broader cryptocurrency market is a cognitive bubble that must pop. The integration of this relevant legal guidance and its consequences into any cryptocurrency investor’s landscape analysis is essential, no matter how unsettling it may be at first glance. That being said, I encourage investors to refrain from interpreting the presence of robust legal regulation as a negative signal. All of the aforementioned guidance explicitly leaves room for what regulators see as the positive consequences of a compliant market. In part II, I will argue for the attractiveness of these positive consequences for both regulators and end users alike, with Bitcoin (BSV) as the original design envisioned by Satoshi Nakamoto, positioned as the perfect tool for this compliance. Bitcoin’s inherent legal compliance is not an accident. But more on that later.

Stay tuned for part II.

Dave Mullen-Muhr is an investor, entrepreneur, writer, and ever-curious learner. A principal at Unbounded Capital, Dave is focused on leveraging Bitcoin to integrate the wisdom of the past with the technology of the present to innovate the future. 

Craig Wright on the importance of legacy in Bitcoin

If you ask the man who started the digital currency fervor, he’ll tell you that BTC is doing almost everything backwards. Dr. Craig Wright has been helping to set the record straight on what Bitcoin is truly supposed to do, and what it was designed to provide, and has published a new blog that delves into what should be taking place, as well as the importance of retaining the legacy that was Bitcoin.

Wright leads off by explaining, “One of the key aspects of Bitcoin is that it is set in stone; the protocol does not change. Many have been misled to believe that Bitcoin would be a system of nodes voting on a protocol, which could not be further from the truth. Nodes do not vote to change the protocol. This is not written in the white paper at all.” The transformation to nodes having a say was implemented by BTC developers and is a complete breakaway from what Bitcoin was designed to provide.

The Bitcoin whitepaper, the one that all subsequent blockchains should have followed, was specifically written in such a way to ensure that digital currency could operate within the boundaries of financial regulations, as well as the enforcement of the same. It was always meant to be a peer-to-peer currency, with the emphasis on currency and how it interacts currently with financial laws.

Wright adds, “The legacy system is one that is analogous to the original. Bitcoin Core differs from my original vision of Bitcoin in every way. Core does not implement Simplified Payment Verification (SPV), and has failed to comprehend what SPV is. More importantly, BTC is not peer-to-peer in any reasonable manner.”

If blockchain developers, mainly those involved in BTC, had read and properly understood the Bitcoin whitepaper, they would have created a digital currency solution that was completely mature and ready to be used from the start. It would have also been more readily acceptable to financial regulators, as it would have adhered to their policies and legal framework. Because the developers didn’t, many BTC users are going to find themselves, over time, facing financial difficulties brought on by those regulators.

There will be those that, either through a lack of understanding of lack of desire to accept the truth, will disagree with what Wright asserts. However, they will soon realize how off-base they are. Wright shows how by stating, “The simple fact is, the myriad protocol changes implemented by Core into BTC make it anything but the legacy. The implementation of BTC is widely misrepresented as the original. This will change. Those seeking to convert law and justice in order to create a system that promotes bucket shops and criminal activity are about to find how it ends. Bitcoin doesn’t avoid tax. Rather, systems such as taxation help stabilise Bitcoin. The IRS has made it clear that a fork from the original legacy protocol is income. Consequently, changes to the stable protocol that was set in stone form an airdrop that must be sold to pay for the income if you wish to keep the new airdrop coin.”

He concludes, “You may not want to believe what I say matters, and Core will try and tell you that what Satoshi said wouldn’t matter anymore. I’m not sorry to tell you, they’re wrong.”

Read Dr. Craig Wright’s latest blog post, “Taxing Times…,” here runs successful alpha test on BSV blockchain was one of the standout projects at the Bitcoin Association’s recent Pitch Day in Seoul, South Korea. Not wanting to lose that momentum, the project recently had successful limited alpha test, inviting real users to start using the service and test its limits.

True Reviews, founded by Connor Murray, seeks to solve the problem of fake or unfair business reviews by removing advertising from the experience, and instead replacing it with a Bitcoin SV (BSV) reward system.

The site began looking for alpha testers on October 12, quickly finding several dozen to help give the project a good once over. Murray returned to Twitter on October 15 to announce the results of the test.

The 62 registered users created 76 reviews of businesses, and those reviews earned a total of 267 tokenized reputation points. Murray noted one user racked up a high of a 51 point reputation score, while another set the high for most reviews with 13.

This wasn’t just for fun though, as he noted that the real goal was to stress test the software, and prepare it to be more feature-filled in the future.

The site promises to be much more than just a review system in the future. Once businesses get involved, the site’s “About Us” section notes that it could become a great system of marketing and reward in the future:

In exchange for a verified review, tokenized rewards (gift cards, coupons, etc) can be issued to the reviewer and redeemed at the business.

If you’re unfamiliar with Murray, he has been a mainstay of the BSV community for quite some time. He spoke at the Expo-Bitcoin International conference in Bogota, Colombia, about the importance of BSV adoption to solving global economic problems. He also hosts the Bitcoin and Beyond YouTube channel, where he’s previously interviewed Dr. Craig Wright on the history of Bitcoin, and the tense relationship the nChain chief scientist has with many of his rivals.

ONE Store’s Jay Lee talks changing the music industry with BSV

Apple and Google may have complete dominance in the mobile apps market the world over, but in South Korea, one platform has managed to topple them both and take over the lucrative market in one of Asia’s largest economies. Despite being quite young, ONE Store has grown aggressively in Korea, and now, it has set its sights on using the Bitcoin SV (BSV) blockchain to disrupt the music industry.

Speaking to CoinGeek during the recently held CoinGeek Seoul Conference, CEO Jay Lee explained how ONE Store has managed to compete against the big tech giants and emerged victorious. While Apple and Google charge up to 30% of the revenues raised by publishers such as game and app developers, ONE Store just charges 5%. This ensures that the publishers make much more from their work.

Lee was one of the speakers in the conference where he made one of the biggest revelations in the BSV ecosystem yet—BUSKON, a music platform that is building on the concept of online busking.

BUSKON will enable the music industry to finally get rid of the middle men who keep on exploiting the content creators and making money from the hard work of the musicians.

“P2P commerce gets rid of the middleman,” Lee explained. “So, we made a decision to start with a small project, by the name BUSKON. This is a whole new concept of music distribution. The music creator uploads their content, the customers will then listen to or watch that content and if they like it, they’ll give a token to them.”

ONE Store began working on the project in 2018, with lot of trials and errors finally culminating into the success that BUSKON is. The company also experimented with a few other blockchain platforms before finally coming to the conclusion that BSV was the best fit for the job.

We tried other blockchain projects, but finally we found that BSV can resolve all the issues we have; reliability, security and more.

Facebook Libra forges ahead as council named and problems continue

Facebook is still chipping away at the rough stone that it hopes will eventually become a highly polished stablecoin project. Despite overwhelming concerns over the ability of the social media company to responsibly manage a financial solution, Facebook still has high hopes for Libra and is attempting to act as if nothing is wrong. Like a duck on a pond, though, what’s on the surface isn’t always the same as what’s found underneath.

Libra just lost a number of its original backers, including Visa, MasterCard, PayPal, Stripe, eBay and Mercado Pago, who pulled out of the Libra Association within the past couple of weeks. According to the U.S. Treasury Secretary, Steven Mnuchin, this is because they came to their senses. He told CNBC this week, “I think they realized that they’re not ready, they’re not up to par. And I assume some of the partners got concerned and dropped out until they meet those standards.”

Those standards refer primarily to guidelines established by findings of a working group created by the G7 to explore stablecoins, BBC reported. The group determined that stablecoins, including Libra, are a major risk to the global financial system and supported its findings by providing nine different ways the projects could be detrimental.

Among those ways, the working group’s report said that stablecoins could cause issues for policymakers when they try to establish interest rates, that they could create financial instability if users were to suddenly lose confidence in the currencies and others. The report asserts, “The G7 believe that no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed” and adds that rectifying any concerns “is not necessarily a guarantee of regulatory approval for a stablecoin arrangement.”

Still, the Libra Association is forging ahead. While it doesn’t have the original 28 founding members it expected to have, 21 are still said to be involved and they all met Monday in Geneva, Switzerland, to sign the Libra Association charter. Among these companies were Uber, Spotify, Anchorage, Coinbase, Vodafone, Kiva Microfunds, Lyft and Women’s World Banking.

Each member will have one vote in how Libra operates and, according to the charter, will have to recuse itself if there’s a conflict of interest. That might result in a lot of recusals, since several companies have already been said to have intertwined relationships with Facebook. However, the charter also allows members to transfer their membership to other companies “under limited circumstances,” which might make any recusal irrelevant.

None of the founding members appears to be too concerned with all the negative attention the project is being given. Spotify released a statement expressing its optimism, saying, “Though it is still in the early stages, we look forward to exploring the opportunity offered by the Libra Association to empower billions of people globally, especially in financially underserved markets.”