Blockchain Bites: Trump on Bitcoin, Powell on Digital Dollars and the Truth About Terrorist Financing

Who watches the watchdogs? President Trump reportedly told his Treasury Secretary to go after Bitcoin while the DEA failed to properly oversee crypto investigations.

AccessTimeIconJun 18, 2020 at 4:09 p.m. UTC
Updated Sep 14, 2021 at 8:53 a.m. UTC

The Washington Examiner published an excerpt of John Bolton's new book detailing a dramatic scene in which President Trump told Treasury Secretary Mnuchin to go after bitcoin before tackling trade with China.

This news follows a report from the Drug Enforcement Administration (DEA) showing how the agency failed to properly oversee crypto investigations, and Fed Chair Jerome Powell's statement that a "digital dollar" should be investigated. Here's the story:

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Top shelf

Who Watches the Watchdogs?
The DEA failed to adequately police its undercover agents’ handling of cryptocurrency, according to the U.S. Department of Justice’s Office of the Inspector General (IG). “The DEA’s management of virtual currency-related activities was insufficient due to inadequate headquarters management, lack of policies, inadequate internal control procedures, insufficient supervisory oversight and lack of training," the IG wrote. Elsewhere, President Donald Trump ordered Treasury Secretary Steve Mnuchin to focus on a clampdown on bitcoin over negotiating a trade with China, according to an excerpt from former National Security Advisor John Bolton's new book.

Officials Weigh In
Federal Reserve Chair Jerome Powell, speaking before the House Financial Services Committee, said the idea of a digital dollar should be taken seriously, adding later, “this is something that the central banks have to design… The private sector is not involved in creating the money supply, that’s something the central bank does.” Elsewhere, Chris Giancarlo, former chair of the U.S. Commodity Futures Trading Commission, said XRP is more like an alternative currency than a security. He argued Ripple Labs hadn’t violated any U.S. securities regulations and should have the same legal status as bitcoin or ether. Halfway across the world, Russia’s Ministry of Justice criticized a new draft bill prohibiting crypto operations in the country, a week after the Ministry of Economic Development also opposed it. The bill is believed to be the brainchild of the country’s central bank, which has a prohibitive approach to crypto. 

Missing Funds
A district judge has denied two requests for subpoenas filed by iFinex, in its bid to track $850 million in user funds seized by authorities after bank accounts held by its payment processor, Crypto Capital, were frozen. It appears the subpoenas were filed in the wrong district. Elsewhere, Wirecard AG, a German payment processor and an issuer of and TenX debit cards, is unable to locate 1.9 billion euros (over $2 billion) worth of cash balances on its trust accounts, after an EY audit. The firm said a third party may have added “spurious” balances “in order to deceive the auditor," The Block reports. Finally, a new report shows that cryptocurrency is not a significant trend in terror financing in the Middle East. However, a new round of U.S. sanctions aimed at Syria may tip the scales in favor of experimentation.

Platform Growth
Polkadot has announced a proof-of-concept token redeemable for bitcoin (BTC). Designed by Interlay, the system will lock BTC on the Bitcoin blockchain and mint a PolkaBTC token on Polkadot, in effort to boost the interoperability of the network. Elsewhere, the South Korean soccer association K League announced a licensing agreement with the blockchain enabled fantasy soccer platform Sorare to enable fans to collect and trade digital tokens representing league players and use them to play fantasy soccer games run by the firm. 

Quarterly Slump
Chinese bitcoin miner manufacturer Ebang estimates it incurred a net loss of $2.5 million on a revenue of $6.4 million for Q1 2020. In an SEC filing ahead of the company’s proposed public listing, Ebang said revenue grew 6.1% annually, while incurring $5.9 million in cost of revenues, in addition to other operational expenses. Ebang is applying to list on the Nasdaq exchange and anticipates its IPO launch price will be between $4.5 and $6.5 for each of the 19.3 million Class A ordinary shares offered, for a market value of around $800 million.

Crypto exchanges OKCoin and BitMEX recently partnered to provide a $150,000 grant to Bitcoin Core contributor Amiti Uttarwar, an alumna of Coinbase and Xapo, to build out privacy features. Elsewhere, the Ethereum Foundation followed up on its 2019 gift to the United Nations Children’s Fund (UNICEF) this week with a second cryptocurrency donation. UNICEF said the fund is accepting applications from startups in emerging markets to receive investments via this second donation of roughly 1,125 ether (~$262,000). So far, UNICEF has invested crypto in nine startups in Mexico, India, Turkey, Bangladesh and Cambodia. Finally, Binance has joined an Indian tech industry association to help set best practices in the Indian crypto market. The Internet and Mobile Association of India helped overturn the nation’s crypto banking ban earlier this year.

Movers & Shakers
Alistair Milne orchestrated an intentional brute force attack on a wallet holding 1 BTC. Dropping hints on social media to each word in a 12-word seed phrase, an attacker was able to guess the remaining clues, inside the period, after the eighth hint dropped. (Decrypt) Elsewhere, JPMorgan nabs former Gemini executive to work on wholesale payments innovation. (The Block), a Hong Kong-based exchange, has announced its entrance into the Bitcoin derivatives market. (Decrypt)

Market intel

Is Bitcoin Undervalued?
Bitcoin is trading near $9,450, up nearly 47% this quarter and 145% from the low of $3,867 observed on March 13. Despite the rise, bitcoin’s Mayer multiple – the ratio of the cryptocurrency’s price to its 200-day moving average – currently stands at 1.15, according to A below-2.4 ratio indicates the cryptocurrency is undervalued.


Crypto's Convergence
Ajit Tripathi, CoinDesk columnist and an executive director at Binance, said the worlds of crypto, fiat and finance are converging. “A new way of thinking about money, banking and economics has inspired banks and regulators to take a fresh look at whether or how the monetary system is working for society at large. As the pace of digital assets and fiat systems coming together accelerates, I hope a world will emerge where customers have greater financial freedom, wider choice and increased access to capital, payment systems and investments than they have today,” he said. 


What Satoshi Understood
Nathaniel Whittemore is joined by The Crypto Dog for a conversation about pseudo-anonymity, global digital nomadism and the trader’s mindset. 

Who won #CryptoTwitter?

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