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Arnold Kirimi

Report: Mexican Crypto Exchanges Pose a Lesser Money Laundering Threat Compared to Commercial Banks

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Money laundering in Mexico is a major problem although the South American nation has taken a number of steps to strengthen its anti-money laundering system. According to the United States authorities, Mexico continues to be one of the most difficult jurisdictions for money laundering, particularly with regard to money laundering operations involving cross-border smuggling of bulk money from narcotics proceeds.

According to a recent study conducted by Mexico’s Financial Intelligence Unit (FIU), financial institutions constitute the biggest risk to money laundering operations compared to cryptocurrency firms. A fresh report by El Economista highlights seven major banks, which it terms as “G7 banking groups,” as the major gutters of illegal funds in Mexico, more than any other financial entity.

Commercial banks launder more money than Bitcoin in Mexico

The “G7 Banking Group” consists of Inbursa, BBVA, Scotiabank, Santander,  HSBC, Citibanamex, and Banorte. These banks control nearly 80 percent of all the resources within the Mexican financial sector. Nonetheless, the FIU did not provide statistics on the potential losses by financial institutions involved in money laundering in its latest National Risk Assessment report.

According to Santiago Nieto Castillo,the head of the financial crimes unit in Mexico, “Derived from the applied methodology, the multiple banks, made up of the seven largest banks in Mexico, is the sector most likely to be used to carry out money laundering operations.” 

Furthermore, the report also pointed out that traditional financial entities like foreign exchanges and brokerage firms were earmarked as “highly risky.” 

Crypto exchanges and digital assets are “emerging threats”

However, the report does not completely claim that fintech entities and digital asset solution providers as purely tidy. The sectors are termed as the potential promulgator of crimes in the financial system, including money laundering operations and financing terrorist activities. 

Authorities all over the world have for a long time doubted that crypto exchanges and other crypto entities could be inclined to use their platforms to promote financial crimes, either directly or indirectly. As a result, these authorities have been tightening their anti-money laundering laws. 

The National Risk Assessment report did not single out financial risks posed by crypto assets, but this does not mean the sector is clean. Cryptocurrency entities in Mexico are tasked with reporting crypto transactions exceeding $2,500 to the financial watchdog, to keep AML requirements in check. 

American Cryptocurrency Tax Defaulters Receive Another Warning Letter

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  1. Internal Revenue Service ( IRS) has sent another stack of letters to alleged cryptocurrency tax defaulters.
  2. The letter warns U.S. crypto holders that they have information that indicates that they may have misreported their income and pay taxes on their cryptocurrency transactions.

According to a Bloomberg report, the U.S. tax agency verified that it had sent warning letters to cryptocurrency users dated 14 August.CoinTracker.io distributed a copy of the IRS warning letters on its website, claiming that they had received it from one of the users. The crypto tax service provider also claimed through the blog post that numerous Reddit users had received the same letter.

Cryptocurrency tax defaulters warned to file taxes correctly

The IRS warning letter requires U.S. residents to file amended returns or delinquent returns “within the notification period ending in August 2020. Furthermore , the agency cautioned cryptocurrency tax defaulters that they already have accurate records of cryptocurrency owners in the U.S and legal action would be taken if the tax defaulters do not meet their tax liabilities by the due date.

As has been the case in the past, the tax authority can send three different types of letters to taxpayers. The category depends on the state of the ratepayer and the extent to which the body opines that the subject intentionally avoids paying taxes.

According to CoinTracker’s head of Tax and Strategy, Shehan Chandrasekera, the initial two letters, letters 6171 and 6174-A, are intended for educational, and they are more lenient. However, in case the taxpayer receives the third one, letter 6173, they should take action immediately because it bears consequences and is more intense. Notably, this letter entails the risk of taxpayer inspection.

U.S. crypto tax laws

Trading crypto assets in the United States are subject to capital gains tax. That implies that at any moment that a U.S. taxpayer buys or sells virtual currencies, they must calculate and report the profits or losses made. Furthermore, those who receive their wages in the crypto form are also required to report this as revenue.

The IRS’s new drive follows a similar campaign where the agency sent warning letters to over 10,000 alleged cryptocurrency tax defaulters back in 2019. Back then, the agency issued the three different letters, requiring taxpayers to respond quickly to the third one.

South Korean Authorities Confiscate Major Crypto Exchange for Wash Trading

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The oldest newspaper in South Korea, Seoul Shinmun, reported on August 26 that the third-largest cryptocurrency exchange in the country, Coinbit, had been seized by law enforcement authorities on allegations of bloating trading volumes. According to the report, the South Korean authorities invaded the exchange offices on Wednesday morning after discovering that the platform had feigned for more than 99 percent of its trading volume.

Trade washing is a widespread practice among cryptocurrency exchanges globally. According to a Bitwise crypto management firm report back in March, more than 95 percent of the trading volumes are fake, with exchanges creating pseudo accounts and using them to trade back and forth, making the respective platforms seem more popular and active. Coinbit also used this illicit method to magnify its trading volume.

Coinbit made over $85 million in illicit proceeds

The South Korean Authorities claim that the CEO of Coinbit, Choi Mo, and his team allegedly purchased different crypto assets using fake accounts, impacting the over 250,000 active monthly users on the platform. Currently, Coinbit has discontinued all its activities, pending investigations.

Notably, the major Korean exchange managed to manipulate its trading volume by creating two accounts with all its funds. One of those accounts falsely traded the major tokens such as BTC, ETH, XRP, and USDT pairs with pseudo accounts.

On the other hand, Coinbit used the second account to trade hidden tokens and ICOs. The obscure tokens are only obtainable from one exchange, that is, Coinbit. By doing this, the major exchange controlled their supply, tampering with their valuation to inflated prices, and ultimately selling them to unsuspecting users on the platform.

South Korean authorities confines exchange’s head office

In addition to the market manipulation strategy, the wash trading scheme netted the major crypto exchange with deceitful revenue over $85 million.

Furthermore, the wash trading scheme has made the South Korean authorities raise doubts regarding Coinbit’s bookkeeping ways. This draws attention to more professional misconduct and fraud. Meanwhile, the South Korean authorities have isolated the exchange headquarters and some of its branches in Korea.

Australian Fintech Platform Sues Ripple Over Brand Identity Misdemeanor

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Ripple faces trademark infringement charges pressed by the Australian Fintech Platform New Payments Platform (NPPA). The firm filed a lawsuit with the Federal Court of Australia, claiming that the American-based blockchain firm breached  its brand identity in branding Ripple’s PayID platform.

According to a court document filed on Friday last week, the Australian fintech platform asserts that the American blockchain firm infringed Australia’s Trade Marks Act (1995) and the Australian Consumer Law, with the illegal use of the firm’s brand and trademark.

Which PayID fintech platform was registered first?

Notably, NPP Australia was launched two years ago as a joint project between major Australian financial institutions. The Australian fintech platform allows clients from different financial institutions to do instant transactions. Currently, more than 60 banks in Australia use PayID.

The majority of crypto exchange platforms in Australia accept cash deposits through PayID, including Independent Reserve and BTC Markets, who are members of the Open Payments Coalition. This information suggests that the blockchain firm was conscious of Australia’s version of PayID.

NPPA claims to have obtained a trademark right for PayID back in March 2017. The platform allows its users to integrate more memorable information facts such as cell phone numbers or email IDs to the platform, and then share their PayIDs with banks they intend to receive payment from.

On the other hand, Ripple’s PayID was inaugurated into the market by the Open Payments Coalition back in June 2018 to merge payments. The platform is a collective effort between more than 40 global corporations such as Bitpay and Blockchain.com.

Ripple lawsuit hearing

A virtual court hearing was held on August 20, while lawsuit management proceedings took place on August 26. Notably, on August 20, Justice Stephen Burley decided that NPPA should give a notice to Ripple outside the land down under.

NPPA is a joint venture between the 13 largest banks in Australia, including the Reserve Bank of Australia.

China’s Blockchain and Fintech Superiority Might Oust America-led Global financial System, Says Ripple Co-founder

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China leads the world in terms of blockchain and fintech, while the US dollar is the reserve currency of the world. The United States has drawn a lot of criticism from industry experts for its inaction on cryptocurrency and blockchain technology. The latest person to comment on this subject is the co-founder of Ripple, Chris Larsen.

The co-founder and executive chairman of Ripple, Chris Larsen, published an op-ed piece arguing that the United States and China are drawn in a “technology cold war.” According to Larsen, the fact that Chinese miners control about 65 percent of the Bitcoin hash rate, they can gain complete control of the Bitcoin network in future. Moreover, the Ripple co-founder urged U.S. authorities to work in collaboration with blockchain and crypto firms in the country.

China’s blockchain and fintech supremacy

In Larsen’s argument, the superiority of China in blockchain and financial technology might be a significant catalyst to future conflicts between the two economic heavyweights. Furthermore, Larsen claims the U.S. dollar might lose its status as the world’s reserve currency in the wake of digital currencies, digital wallets, blockchain technology and interoperability procedures.

With China leading the world in the fronts as mentioned above, Larsen argues it creates a possibility for the nation to overtake the traditional financial system powered by the U.S. dollar through digital payments such as crypto-assets such as the digital yuan. In his piece, Larsen noted:

“For China, this is a once-in-a-century opportunity to wrest away American stewardship of the global financial system, including its ultimate goal of replacing the dollar with a digital yuan.” 

Can the Chinese reverse Bitcoin transactions?

According to a study conducted by the University of Cambridge Centre for Alternative Finance, 65 percent of all cryptocurrency mining operations take place in China. In Larsen’s argument, if the United States loses financial superiority to China, it could threaten digital currencies. He argues that the Chinese could take advantage of the accumulated hash power to influence crypto transactions.

China and the United States are currently embroiled in a battle surrounding technology advancement. Notably, the two companies are battling on the upcoming 5G technology. Chinese firms have been pushing aggressively to have a bite of the American telecom market. Still, U.S. authorities have put in place barriers to the Chinese, citing matters of national security.

Indian Citizen Indicted after Purchasing Drugs Worth $27,000 Using Bitcoin on Dark Web

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There is no question that cryptocurrencies, by providing easier access to capital and financial services, have the potential to enable social and economic growth worldwide, particularly in developing countries. On the contrary, we can not ignore the fact that criminals use cryptocurrencies like Bitcoin to run and fund illegal activity on the dark web. However, the law enforcement authorities keep a close watch, with such crimes committed on the dark Internet using cryptocurrencies. According to a report by the Times of India on August 24, a man from Kerala is being detained by the Narcotics Control Bureau for allegedly purchasing drugs on the dark web using Bitcoin.

24 year old indicted for buying ecstasy using crypto

K Rahman, a 24-year-old man from Kerala , India, has been indicted by the authorities for allegedly acquiring $27,000 ecstasy pills using Bitcoin. According to the report, the drugs were shipped from Frankfurt at the end of July using a fake address. The suspect was about to receive illicit narcotics through the Foreign Post Office in Chamrajpet.

In fact, the contents of the parcel were 750 grey and brown pills, which were later identified as ecstasy, often referred to as MDMA. The report states that the package was initially examined on 31 July. Upon testing the material as illegal, the authorities initiated an investigation headed by Bangalore’s regional director of the Narcotics Control Bureau, Amit Ghawate.

After almost 20 days of tracking the recipient of the package, the bureau captured Rahman. According to the officer in charge of the case, Rahman sells narcotics to youngsters, especially college students. He notes:

“Rahman had, on previous occasions, ordered the drugs and received them at the city’s FPO before selling them at parties and among youngsters, mostly college students.”

BTC usage on the dark web

Currently, Bitcoin is the most widely accepted crypto, both on the dark web and legit markets. Darknet markets (DNM) are known to supply all sorts of goods, some illicit, some less so, but acquirable using crypto such as BTC and delivered to your destination.

The dark web mainly operates using Bitcoin or the privacy-focused monero cryptocurrency. According to a report by Crystal Blockchain Analytics back in May, Bitcoin activity on the dark internet increased by 65 percent during Q1, 2020.

Ethereum Miners Hit Back at Plan to Cut Miner Rewards by Over 70%

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A fresh proposal for an Ethereum improvement (EIP), aimed at reducing block rewards by a massive 75 percent, caused severe disapproval by Ethereum miners who claim that the move would jeopardize the safety of the network. Miners say that those responsible for the new EIP-2878 care less about the security of the blockchain and are more concerned about the interests of the investor.

The fresh EIP-2878 suggests proof-of-work validators reward be slashed by 75 percent, from 2 ETH per block mined to 0.5 ETH. The justification of this plot is to align Ethereum’s inflation index in line with that of Bitcoin and safeguard Ethereum’s power parities.

The proposal was originally published on August 11 by ConsenSys Managing Director John Lilic and Ledger’s Global Head of Client Success Jerome de Tychey on the Ethereum Magicians Forum, where developers and miners can discuss its effectiveness. However, the responses of the miners since the proposal was made have been against it.

Ethereum miners worried fresh EIP might leave the network vulnerable to attack

In particular, Ethereum miners who use GPUs did not waste much time before hitting back at the fresh EIP. The primary concern of GPU Ethereum miners is the significant decline in block rewards reduction more than doubled the previous modification, which might facilitate a 51 percent attack on the Ethereum blockchain.

According to Time Beiko, the product manager at PegaSys:

“The biggest consideration, in my opinion, should be the security of the network (i.e. how do we ensure the likelihood of 51% attacks remains low, how do we keep a diverse set of miners on the network, etc.).”

Another user raised a different query in his argument against the fresh EIP, claiming that ASICs which are more profitable compared to GPUs would kick them out of the market if block rewards are reduced without changing the algorithm.

A drop to 1.5 ETH or 1 ETH would be more reasonable

The co-founder and CEO of Bit Capital Group, Jimmy Thommes, argued that the Ethereum network should stop trying to imitate Bitcoin’s inflation rate because it is an older network created under different ideologies. In addition, the fresh EIP makes Ethereum miners feel that they are taking advantage of it.

Indeed, most of Ethereum miners were not against the precept to reduce block rewards as Ethereum network does not have an inbuilt halving tool like BTC to curb inflation. The system is dependent on EIPs to curb inflation rates with proposed block rewards diminution. However, the majority of Ethereum miners offered a reduction to 1.5 to 1 ETH would be wiser.

OmiseGo (OMG) Token Surges by 156% Following USDT Integration to Hit $8.79

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OMG tokens might be the hottest crypto asset in the market right now. On August 20, Tether announced the integration of its stablecoin, USDT, on the OmiseGo (OMG) Network. Following the announcement, the price of OmiseGo’s native token, OMG, skyrocketed by almost 160 percent to reach $8.79.

Back in June, after the first partnership with Tether, the price of OMG tokens shot up again; but then it was 20 per cent to a much lesser extent. OMG tokens were struggling to hit the $1 price level in early 2020.

OMG token price bullish

Its price rested around $0.50 following the market meltdown back in March, until major U.S. cryptocurrency exchange, Coinbase, listed the token. The news propelled OmiseGo tokens past the $1 resistance to $2 level before correcting.

OMG tokens price action fluctuations this year are primarily owed to rumours of its partnership with Tether, which are now authentic. Currently, USDT occupies the number three spot, as the third-largest cryptocurrency by market capitalization after usurping Ripple’s XRP yesterday. Furthermore, USDT is also the most traded stablecoin and the most predominant ERC20 token.

The rumours of the partnership were verified back in June, pushing OmiseGo price by 20 percent within hours, hitting the $2 level. Last weekend, OmiseGo tokens were trading just under $2. Following Tether’s announcement yesterday, the price of OMG tokens rallied by a massive 156 percent in 24 hours to reach a multi-week high of $8.79, according to Coinmarket cap.

OMG token

OmiseGo USDT integration ease Ethereum Network congestion

At the time of writing, the market value of OMG tokens is $8. The current price comes after a slight receding from highs of $8.79. Tethers integration with OmiseGo has arrived at a perfect time when the DeFi market is hot; and Ethereum is struggling to handle the pressure, as transaction fees on the Ethereum network skyrocket.

After BTC, USDT is the most popular trading pair and handles most transactions on the Ethereum network. OmiseGo’s capacity to multi-trades into a single trade can help unclog the Ethereum Network, relieving the entire ecosystem from high network fees and delays.

USDT Surpasses Ripple (XRP) to Recoup Top 3 Cryptocurrency Spot

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Tether (USDT), the most popular stablecoin in the world, is yet again battling Ripple’s XRP for the top three spots. Can USDT maintain the number 3 spot? 

Earlier today, the world’s largest stablecoin, Tether, became the third largest cryptocurrency by market capitalization, forcing XRP to the fourth spot, according to blockchain analytics firms Messari and Coin Metrics.

USDT

Tether overtakes XRP once again

As recently reported, USDT’s market capitalization surged by $1 billion in 7 days, pushing the total to $12 billion. However, according to a tweet by Coin Metric analyst Lucas Nuzzi, the total market capitalization of USDT exceeded $13 billion, surpassing Ripple’s XRP in the process.

Notably, market capitalization refers to the number of tokens multiplied by the price of each coin. However, since Tether is a stablecoin, its price is not likely to fluctuate and the price of a USDT token will always remain $1. The only manner to raise USDT’s market cap is by mintage of new tokens.

This is not the first time for USDT to surpass XRP in market capitalization ranking. Earlier this year, during the March market collapse, Tether concisely took over as the third largest cryptocurrency in the world after exceeding $5 billion in market capitalization.

USDT still growing despite damaging lawsuits

The growth of Tether comes amid a string of lawsuits facing its parent firm, iFinex. Ifinex is also the parent company to popular cryptocurrency exchange platform Bitfinex. Bitfinex is facing charges against fraud for supposedly hiding a loss of $850 million dollars of the commingled client and corporate funds from investors. The lawsuit is led by New York Attorney General Letitia James.

Furthermore, Tether is also facing allegations of printing billions of dollars in crypto, and for manipulating the price of BTC back in 2017. Nevertheless, USDT is still growing and is currently occupying the third spot among cryptocurrencies.

Proposed Pan-Europe Crypto and Digital Finance Regulation Framework to Boost Crypto Assets Growth

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According to a recent report by the financial news agency IFC Review, the European Commission, the law-making arm of the European Union, is concluding the first-ever crypto and digital finance regulatory structure proposed by Europe. The pan-European structure is intended to strengthen the development of crypto assets in the long run.

If the regulation is successfully passed into law and implemented, its acceptance would give the best possible legal atmosphere for crypto-related entities to thrive and contribute to the European economy.

Bitcoin and stablecoins recognized as financial instruments

Back in 2019, the Commission spent most of the year deliberating with industry experts and specifying crypto terms. Consultations included the acknowledgement of digital assets such as Bitcoin and stablecoins as financing tools and the development of a regulatory structure for blockchain-based entities.

According to the chairman of the European Blocktech Federation, the recognition of cryptocurrency assets as financial tools established them among the broad group of European and national legitimate tools that oversees Europe’s financial market. Moreover, he termed the upcoming crypto and digital finance laws as ‘historic,’ in regards to the immense potential it creates for businesses and individuals to develop digital finance solutions.

The proposal also elaborated a project to develop a single market for digital currencies, to facilitate cryptocurrency trading across all European nations. By comparison, the plan is the same as the launch of the Euro back in 1999, a single currency that united all members of the European Union back then.

Crypto and digital finance regulatory structure will boost European growth

The new crypto and digital finance regulations follow European Commission’s vice president Valdis Dombrovskis sentiment back in June; regulatory uncertainty surrounding digital assets hinder growth and development in the Eurozone. According to the report, the proposed crypto laws are likely to be enacted in Q3 2020. However, the report notes that interruptions can be expected due to the novel coronavirus disaster.