An 18-year-old Japanese youth has been sent to prosecutors in the country’s first ever trial involving cryptocurrency cyber-theft.

According to a report from The Japan Times on Friday, the unnamed minor from the city of Utsunomiya, Tochigi Prefecture, allegedly stole about 15 million yen ($134,340) in the cryptocurrency monacoin. In Japan, you are legally considered a minor until the age of 20.

From Aug. 14 to Sept. 1, 2018, the youth is said to have repeatedly hacked cryptocurrency wallet Monappy by leveraging a glitch on its website, sending multiple transfer requests to himself and causing losses to about 7,700 users of the service.

He later transferred the stolen tokens to an account with a different cryptocurrency platform where he exchanged the monacoin for another cryptocurrency. The stolen funds were spent it on items such as a smartphone, according to the report.

Japanese police said the youth has confessed to the crimes, the Times writes, quoting him as saying:

“I felt like I’d found a trick no one knows and did it as if I were playing a video game.”

Monappy’s website has been offline since the hacks, and currently reads that the “service has been suspended due to external attacks.”

In November, Monappy posted an updated on its Medium blog, saying that it had “completed the direct repair of defects” and was conducting a “final security check” before resuming its operations.

Japan has lost getting on for a billion dollars through cryptocurrency thefts over the years, with major breaches including Coincheck ($533 million), Mt. Gox ($350 million) and Zaif ($60 million), among others.

In a case involving the Mt. Gox collapse, former CEO Mark Karpeles today escaped charges of embezzlement and breach of trust, but was found guilty of manipulating exchange data by the Tokyo District Court. Karpeles was handed a suspended sentence of two and a half years.

Japanese policeman image via Shutterstock

Canadian financial regulatory authorities are considering putting in place rules for cryptocurrency exchanges in the country.

The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) published a consultation paper on Thursday, seeking input from the fintech community on how regulatory requirements can be developed for cryptocurrency platforms.

“The emergence of digital and crypto assets continues to be a growing area of interest,” said Andrew J. Kriegler, president and CEO of the IIROC in a separate statement on Thursday, adding:

“We must adapt to innovation, and provide clarity to the market about how regulatory requirements might best be tailored and applied to these unique business models, while maintaining investor protection.”

Considering the “novel” features and risks of cryptocurrencies, the regulators proposed applying securities laws wherever applicable.

For instance, if cryptocurrencies are securities and/or derivatives traded on an exchange, that exchange would be subject to securities and/or derivatives regulatory requirements, they said. Most “utility tokens” have involved the distribution of securities, usually as investment contracts, they added.

The agencies are of the view that cryptocurrency platforms are hybrid in nature, meaning they can perform functions of one or more market participants, including alternative trading systems, exchanges, dealers, custodians and clearing agencies.

Therefore, they are considering the preparation of a set of “tailored” regulatory requirements to address the risks and features of cryptocurrency platforms.

Currently, none of the cryptocurrency exchanges in Canada is recognized as an exchange nor is authorized to operate as a marketplace or dealer, according to the paper.

The recent QuadrigaCX saga highlighted the lack of regulations covering the cryptocurrency industry in Canada.

The Canadian cryptocurrency exchange’s CEO, Gerald Cotten, died last December, apparently without leaving a way for staff to access the computer storing the failing exchange’s funds. QuadrigaCX still owes its customers roughly $190 million in both cryptocurrency and fiat.

Last month, the securities watchdog in the Canadian province of British Columbia, the British Columbia Securities Commission (BCSC), said that it has no remit to regulate the troubled exchange.

The CSA and IIROC consultation paper is open for public comment until May 15.

Canada flag image via Shutterstock 

Longtime Mozilla Chief Operating Officer Denelle Dixon has officially joined the crypto ecosystem.

Dixon has joined the Stellar Development Foundation as CEO of the nonprofit organization, which promotes the top-1o cryptocurrency Lumens (XLM). She succeeded the project’s creator, Jed McCaleb, who has moved to the role of chief architect, in which he’ll focus on protocol growth and adoption strategies.

In a statement to CoinDesk, Dixon said her goal “will be to listen, learn, support and do. I want to help move Stellar to the place it seeks to be, and that’s how it starts. More to come once I start.”

She added:

“This is my first role in the crypto space officially. It’s awesome and exciting.”

McCaleb said in a press release that Dixon’s “long experience leading operations and business at Mozilla, as well as her work on the policy side, with advocacy around Open Internet and encryption and privacy, will be indispensable to SDF in the coming years.”

Dixon already showed a penchant for cypherpunk innovation when she urged Mozilla to launch the data-protecting browser extension called Facebook Container within hours of the social media platform’s Cambridge Analytica data-sharing scandal hitting the newsstands.

“As Mozilla’s COO, I led the organization’s ongoing fight for Net Neutrality. I led the global effort to ensure that people can control their personal data,” Dixon wrote in a blog post about her new gig, emphasizing how she wants to help the foundation partner with commercial entities without sacrificing its “core mission.”

She joins the crypto foundation at a fortuitous time, the same week the exchange Coinbase added XLM trading to its institutional Coinbase Pro offering. Stellar is also a key partner with IBM, which is working on stablecoin projects running on top of the blockchain.

“Among blockchains, Stellar is uniquely positioned to connect to existing payment infrastructure,” Dixon concluded.

Denelle Dixon image via YouTube

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Bitcoin’s current period of price consolidation may end with a bull breakout, price-volume analysis indicates.

While the cryptomarket leader is lacking a clear directional bias for the tenth straight day, 24-hour trading volume remains elevated near the 10-month high of $10.75 billion seen on Feb. 24, contradicting the popular theory that investor interest drops in a rangebound market.

As a result, the pullback from recent highs near $4,200 appears likely to be nothing more than a bull breather and BTC could soon draw bids.

Validating that argument is the fact that the recovery rally from the lows near $3,400 seen on Feb. 8 was backed by high volumes. Daily trading levels jumped above their 50-day moving average 35 days ago and have remained above the key metric ever since – a feat last observed during the height of the bull market in the third quarter of 2017, according to CoinMarketCap data.

Hence, the probability of BTC ending the ongoing consolidation with a strong move to the downside is quite low.

As of writing, BTC is trading at $3,930, representing a 0.5 percent gain on a 24-hour basis, according to CoinMarketCap. Twenty-four-hour trading volume is seen at $10.62 billion, while the 50-day moving average of daily trading volume is seen at $7.615 billion.

Daily chart

As seen above, BTC jumped 7.5 percent on Feb. 8 (arrow), invalidating the immediate bearish setup. The strong move was backed by a hike in trading volumes above their 50-day MA. Since then, volume bars have consistently printed above the key average, validating the corrective rally from $3,400.

The setup looks even more bullish if we take into account the higher lows and higher highs on volume chart. Recent price pullbacks were accompanied by a drop in volumes (lack of bear support), explaining the weak follow-through to the rising channel breakdown witnessed on Feb. 24.

The failed breakdown coupled with elevated volumes amid price consolidation indicates scope for a re-test of $4,208 (Feb. 24 high).

That said, the long period of consolidation could test the bulls’ resolve, and a brief drop below the immediate support of $3,865 (March 12 low) could be seen before a continuation of the rally.

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Bitcoin image via Shutterstock; charts by Trading View

More or less decentralized? For Jimmy Song, there’s no in between.

An author and Bitcoin Fellow at venture firm Blockchain Capital, Song made that point repeatedly in a debate with IBM engineer and Hyperledger Fabric co-lead Chris Ferris at SXSW Thursday, where he told the crowd at the Hilton Austin in no uncertain terms: “You either have control over your stuff or you don’t. It’s a zero or a one.”

The debate pitted permissioned blockchains – the private networks being pitched to big business – against permissionless blockchains – the technology undergirding bitcoin and other open-source networks. Billed as a “deathmatch” on the festival agenda, Song was determined to give the audience what they came for.

“Why do you need permission if it’s supposed to be decentralized?” he asked. “There has to be an entity that’s giving you permission, and that’s by definition centralized.”

While Song took the binary view of decentralization, Ferris argued that blockchains can exist on a spectrum. Sure, permissioned blockchains are less decentralized, Ferris said, but their added trust mechanisms mitigate perceived risk.

“Permissionless blockchains do not necessarily solve the problem of trust,” he added.

Song wasn’t having it. To illustrate the degree to which he was willing to extend his point, Song used the example of the ethereum fork following the infamous hack of The DAO, when the project’s developers and users agreed to introduce a code update aimed at rolling back the stolen funds.

“I think Ethereum is a permissioned blockchain,” Song said, adding:

“When Vitalik says, ‘These particular transactions aren’t particularly good for the ecosystem so we’re going to roll them back,’ that, to me, is a permissioned blockchain.”

On stage and in conversation with CoinDesk beforehand, Song argued that every application of blockchain to anything but bitcoin is a waste. “Blockchain is really useful for bitcoin,” he said during the debate. “Everything else has a central point of failure.”

Prior to the debate, Ferris told CoinDesk that he hoped he could make the point that there’s just different use cases for different kinds of blockchains, and those use cases should determine what level of decentralization should be called for.

“Certainly part of the conversation will be that bitcoin doesn’t solve the same problems we are trying to solve in an enterprise context,” Ferris told CoinDesk.

IBM, he explained, is primarily building products that allow large enterprise partners to share information rather than exchange money. For example, today Big Blue announced a deal to record information about businesses’ legal status across France. Trying to find some common ground, Ferris argued there’s space for the approaches of both sides.

“I think there are a ton of use cases where permissioned blockchains make a ton of sense,” Ferris said. “I also think there’s a ton of use cases where a permissioned blockchain doesn’t make any sense.”

But Song didn’t come to accept concessions. He said all the blockchains besides bitcoin’s might as well just run on a faster, cheaper centralized database.

“A permissioned blockchain is an oxymoron because it’s a centralized database that’s masquerading as something decentralized,” Song said.

The exchange case

The QuadrigaCX exchange debacle captured the difference between the two positions better than any other part of the debate.

The Canadian exchange’s owner died and lost $190 million worth of cryptocurrency when it turned out he was the only person with access to the system’s private keys. Both Song and Ferris saw a disaster and yet came to very different conclusions about it.

Ferris brought up Quadriga late in the debate by first saying, “The whole point of permissioned blockchain, enterprise blockchain, is reducing risk,” he said.

It’s a system where every major user of the protocol knows everyone else. “We can put a governance model over that and legal framework around that says: ‘If you do something to disrupt the system, we’ll sue the pants off you and you’ll regret that,'” Ferris said.

Song saw that as precisely the problem. If it’s possible for a governing body to step in and punish the operators of a platform, then to Song that defeats the fundamental point of decentralization.

Ferris saw Quadriga as an illustration of the fundamental user experience problem of permissionless systems because it illuminates dramatically how bitcoin doesn’t have a fallback if private keys are lost.

But Song saw that as its virtue:

“You are either self-sovereign or you are not.”

Bitcoin Core

Bitcoin does have its powerful authorities, though, a point that was argued by the debate’s mediating presence, Angela Walch, a professor at St. Mary’s University School of Law.

“I am struggling with how bitcoin doesn’t have similar centralization of power with the core developers,” she said.

Walch used the example of the inflation bug disclosed in September 2018, in which developers originally minimized its true implications prior to pushing the fix.

“They list a total of 11 people who knew about this. Those people made a decision about how they were going to fix this,” Walch said. “They told a few select miners at the beginning. That miner was given privileged knowledge.”

She used the point to argue that bitcoin’s core developers have outsize power in the network. Users had to trust, for example, that none of those leaders who knew wouldn’t short bitcoin in advance of the ultimate disclosure. “I’m arguing those people were exercising centralized power,” she said.

Song countered by saying that Bitcoin Core is not the only bitcoin software and it’s open source, run under an MIT license that warns everyone to use it at their own risk. If something is wrong with the bitcoin software, users should be able to find that and report it.

“If the goal is to get mass adoption, for hyper-bitcoinization,” Walch said, “Ninety percent of the people are not going to understand how the code works, so just saying it’s open source is not an out.”

Ferris took this point further and pointed out that there is a very small number of people who are maintainers of bitcoin code, alleging that if something happened to all of them it would yield chaos.

Ultimately, the debate circled back at that point to another round on sovereignty. Should users be made collectively responsible for making sure core maintainers aren’t malicious or should they use the state as a fallback?

“You are speaking about regulation and governance frameworks as if it’s a bad thing,” Ferris began.

Song cut him off, saying, “A lot of the time it is.”

Jimmy Song image via CoinDesk archives

Mark Karpeles, former CEO of the long-defunct bitcoin exchange Mt. Gox, has escaped some charges, but been found guilty of manipulating exchange data in a Japanese court.

According to a report from The Wall Street Journal on Friday, the Tokyo District Court found Karpeles guilty of wrongfully making electronic records connected to Mt. Gox’s books, but innocent on charges of embezzlement and breach of trust.

Karpeles was handed a suspended sentence of two years and six months. He must maintain a good record over the next four years to avoid jail time.

The court’s verdict comes almost five years after Mt. Gox filed for liquidation in April 2014 after claiming it was hacked for 850,000 bitcoin, some of which was later found.

According to the WSJ report, Karpeles’ lawyers wrote in their final argument to the court:

“Mt. Gox did not collapse because of the defendant’s [Karpeles’] wrongdoing. On the contrary, the defendant was trying his hardest every day to prevent its collapse.”

In December, Japanese prosecutors were seeking a 10-year sentence for Karpeles for embezzlement, alleging he used about $3 million of customers’ funds for his own personal use.

Karpeles, on the other hand, reiterated his innocence and apologized several times over the years. He once said, “I never imagined things would end this way and I am forever sorry for everything that’s taken place and all the effect it had on everyone involved.”

In August last year, the Japanese bankruptcy court that initially oversaw the case sided with creditors who made a petition to move the case to civic rehabilitation. As such, creditors could file for receiving their bitcoin locked up at Mt.Gox in their original form rather than having them converted to fiat currencies.

In January, Mt.Gox’ trustee Nobuaki Kobayashi announced the deadline for creditors to file proof of their claims was extended to March 15, after which the trustee will submit the rehabilitation plan to the court.

Mark Karpeles image via CoinDesk archives