News about Cryptocurrencies Around the World #3

The past two weeks were characterized predominantly by discussions over the hacking of Bitcoin exchange BitFinex. Other noteworthy news streamed mainly from Zimbabwe, the U.S., Isle of Man, China, and customarily from Russia.

Proponents of Bitcoin were equally shocked by the announcement of the BitFinex Bitcoin Hack. Hackers managed to steal more than 100,000 Bitcoins from the Exchange worth USD 70m. The event is still shrouded in mystery as sources of a possible mistake are currently being investigated. It is known that the Exchange cooperated with a service administering BitGo e-wallets. BitFinex employed the so-called ‘multisig wallets’ secured by multiple keys. The enhanced security element has nevertheless failed to prevent the attack while suggestions of a human failure kept increasing.

The devastating theft aside, the embezzlement of BitFinex customers was even more aggravated by the company´s proposed solution, as the Exchange had decided to reduce customers´ balances by 36% (including other currencies besides Bitcoin) in order to distribute losses amongst all users. Its plan is to compensate customers with newly issued BFX tokens, eventually to be redeemed for full repayment or exchanged for shares in the Exchange´s holding company. This quick fix has nonetheless raised many questions. As an example, it is yet to be determined how much of a dividend will customers receive in case they opt for the share exchange.

Perhaps unsurprisingly, these articles have (rather unwittingly) developed a habit of mentioning Russia. As noted before, the Finance Ministry has signalled its intention to modify the legislation in favour of Bitcoin exchanges. This time, however, it is the Tax Office that came out with devised complications, as the bureaucracy would like to see its citizens reporting all transactions conducted with the help of virtual currencies. In other words, the aim is to have an overview of all account movements on the trajectory from Russia to foreign countries. By this move the tax authority has joined ranks with other institutions in Russia grouped in a crusade for/against Bitcoin and virtual currencies. It is quite paradoxical that each of them has a different opinion on the matter.

The Central Bank of Zimbabwe has decided to group with akin banks denouncing and opposing the utilization of Bitcoin. The bank has expressly discouraged the country´s citizens from using the virtual currency at any time, as a result of the weak regulatory state of cryptocurrency exchanges and start-ups in Zimbabwe, possibly creating a source of danger for its citizens. Statistics, however, point to the contrary as evidence shows that Zimbabwe represents a favourable environment towards virtual currencies. According to the data, locals use mobile payments more often and regularly than bank account payments, with bureaucracy and the grey economy figuring as the most likely reasons behind this trend. If you want to open a bank account in Zimbabwe, you have to provide evidence of a stable income along with many other documents, which may prove to be an obstacle for many, as more than half of the country´s GDP accounts for the shadow economy. As a consequence, bank accounts are only available to a few chosen, creating a hospitable environment for the rise of cryptocurrencies.

Shifting our focus overseas, the U.S. Department of Health has called for White Papers and a tender with regards to the use of the Blockchain technology in order to protect, manage, and exchange electronic health information. The goal of this research challenge is to address ways of the system´s applicability and its effective implementation in practice. The project seems to be a logical consequence of the 2015 hacker attack on Anthem which resulted in stealing the personal information of more than 80m people. The health sector could thus benefit from three main assets of Blockchain – namely security, transparency, and immediate availability of data in real time.

Yet another positive reception to Blockchain was displayed on the Isle of Man. The island´s government had previously announced its cooperation with Credits, a start-up. This mutual endeavour focuses on areas of application development for the Internet of Things operated on the basis of Blockchain. After more than a year, the development process has been concluded, transcending into its test phase. While results remain yet to be seen, the Internet of Things has been lately a hotly discussed topic as Blockchain presents an ideal avenue for its development.

Last but not least, highlights from the courtyard of Alibaba, a Chinese company point at an announcement describing the company´s plan to register all gifts received via Alipay (a palyment platform) on Blockchain. The decision came after a recent boom in philanthropy in China (accompanied by several misuses of funds).

Translated by Edward Szekeres

Martin Lindak