As major financial institutions began to show interest in blockchain earlier this year, many were vocal in their praise for ethereum, a public blockchain-based platform for decentralized application development.

But as has been illustrated by high-profile issues such as the collapse of The DAO and the recent contentious hard fork, the second most popular public blockchain platform is still showing signs of growing pains, ones that could lead to new questions of its underlying technology despite enterprise interest.

However, KPMG US blockchain lead Eamonn Maguire says he doesn't believe enterprise clients see the events as an impediment to progress for the industry at large.

While he acknowledges events like the DAO collapse and the hard fork could create poor market optics, he said it hasn’t yet happened as a result of recent events with ethereum. Rather, Maguire said KPMG sees the issues as learning experiences, as well as indications that more attention needs to be given to the security of private blockchain projects.

Maguire told CoinDesk:

"We see it as a step in the evolution of blockchain that reminds people of the kinds of security solutions that need to be built."

Specifically, Maguire said this means developing better standards on how blockchain data is secured and accessed, including potentially applying more conventional or previously tested protocols for use in blockchain environments.

Maguire went on to stress that it perhaps remains too early to tell what specific issues were at play and how future projects implementing similar concepts can be improved.

However, Maguire said that the ethereum platform "is not in question", while stating that any client relationships have not been impacted by these events.

"I see it as more of a hiccup. It’s one that I wish had not occurred, [but] we're not seeing it have impact in market confidence," he said.

KPMG image via Shutterstock

EthereumKPMGThe DAO

Original author: Pete Rizzo

Stephen D Palley is a lawyer in private practice in Washington, DC, focusing on construction, insurance and software development, including blockchain and smart contract design.

In this opinion piece, Palley argues that a recent court case in which bitcoin was deemed not be "money" has questionable precedential value despite claims to the contrary.

A Miami, Florida, trial court recently dismissed a criminal case against a defendant who had sold bitcoin to a police detective as part of an undercover investigation.

The case, Florida v Espinosa, has been already been cited by some potentially important precedent for future cases, particularly those where bitcoin's status as "money" or "currency" is at issue. Bitcoin industry advocates will also cite the case when arguing for legislative reform and greater regulatory clarity.

But, as legal precedent, Espinosa's value may be limited. It’s a single decision from a Florida state court trial judge regarding state specific statutes.

It's not an appeals court decision. It's not binding "precedent" in any other state or in Federal Court. Half of the opinion has to do with proving criminal intent, but little to do with bitcoin.

Finally, the Court’s analysis of whether bitcoin constitutes "money" or "currency" differs from approaches other courts have taken, and may (or may not) be adapted in other circumstances.

The analysis

Precedential or not, the case illustrates how courts apply well-established legal principles and procedures to new technologies. Consider how the court reached its conclusion.

It's a process familiar to anyone who has read a case or two. Find the facts, then apply the law, render judgment.

Count I of the criminal information charged the defendant as an unlicensed "money transmitter" because he'd sold bitcoin to an undercover detective for dollars.

The court dismissed these charges, holding that:

The statute didn't apply to a direct transaction without a "middleman" Bitcoin isn't a "payment instrument" The defendant wasn’t a "money transmitter" because he hadn’t charged a “fee".

The first two prongs of the analysis involve fairly standard statutory analysis ("the law says this", "the alleged conduct is this", "therefore the law does/does not apply.")

The third prong is a bit more elaborate.

Citing case law, the court reasoned that to be a "money transmitting business", a fee must be charged. While the defendant made a profit (in bitcoin) on his sale, the court held that a cryptocurrency "profit" isn't a fee. According to the court, to qualify as a fee, a payment must be made in fiat money.

In support of this conclusion, the court observed that "bitcoin has a long way to go before it is the equivalent of money".

This last point is not one that all courts have accepted, and it’s a somewhat surprising conclusion. (See SEC v. Shavers, in which the Court held bitcoin "is a currency or form of money" for purposes of determining whether or not security in under Federal Securities laws).

The charges

The court also dismissed two counts of money laundering, holding that the defendant didn't have the kind of criminal intent required by the applicable Florida statute.

An undercover detective told the defendant that the purchased bitcoin would be used for an illegal purpose. The court said that this wasn't enough to meet intent requirements under the Florida money laundering statute, which the court court also said was too vaguely written to apply under the facts of this case.

The court says that anything can be used for money-laundering, including bitcoin. It just happens that there wasn't enough evidence of the defendant’s criminal intent, and (according the court), the word "promote" in the statute wasn't clear enough.

Given slightly different circumstances (or a different judge) a different outcome isn’t hard to imagine.

Selling something for a profit with the express knowledge that a third party will use it to commit a crime (and the intent to help them commit it) could be problematic, depending on the facts and jurisdiction.

A defendant might risk being charged as "accessory before the fact", among other things. Other courts, in other circumstances, have rejected the notion that bitcoin's status as a virtual currency is so unique as to protect a criminal defendant from conviction.

Precedent unclear

In this respect, Espinosa is also consistent with the court's decision in the Silk Road case, in which the defendant didn't make out as well, but where the court says that bitcoin use in and of itself isn't a problem — it's "how" you use it. The same seems to be the case here.

It’s just that the court didn’t think that Mr Espinosa had done anything wrong. Will Espinosa prove to be important or persuasive authority in the future? It's too soon to say.

For now, it's a fine example of law's adaptability and the power that judges and lawyers have to shape it.

Bitcoin image via Shutterstock

Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.

CrimeLaw

Original author: Stephen D Palley

The Financial Stability Board (FSB), an international body composed of central bank officials and finance regulators, said in its latest annual report that it continues to assess opportunities and risks related to digital currencies.

The report, published earlier this week, indicated that the FSB’s work is largely in line with previous statements from the organization. In March, the group said that it was actively discussing the technology and its impact on the financial system.

The report states:

"The FSB's continued work in this area will consider both the risks and opportunities presented by the developments in financial technology, the issues raised for public authorities by these technologies, possible steps to address potential risks, and opportunities for cooperation in the FSB and with the standard-setting bodies to deepen analysis and develop regulatory perspectives."

The FSB disclosed its work in the area earlier this year, when Reserve Bank of India deputy governor Subhash Sheoratan Mundra offered details during a speech given in February.

Currently chairng the FSB is Mark Carney, governor of the Bank of England and former governor of the Bank of Canada. Carney recently detailed the central bank's work on blockchain technology in statements released earlier this month.

The FSB was formed in 2009 by the international organization G-20 in the wake of the financial crisis.

Image via Shutterstock

Financial Stability BoardG20Regulation

Original author: Stan Higgins

A Florida man was reportedly robbed at knifepoint during a sale of $28,000 in bitcoin this week.

According to the Sun Sentinel, a Palm Beach, Florida-based news service, Steve Manos, a 32-year-old Lake Worth resident, arranged to meet two individuals in West Palm Beach to exchange cash for the digital currency.

Manos is said to have told local authorities that he had met with the two previously for other bitcoin sales. Yet, on 26th July, one of the two sellers pulled out a knife after Manos provided them with $28,000 in cash (worth about 40 BTC at press time). In the ensuing struggle, one of the alleged robbers attempted to take a gun owned by Manos, and ultimately the two individuals fled with the money.

The Palm Beach Sheriff's Office went on to arrest 34-year-old Andre Allen after Manos provided the office with a phone number he had used to initiate contact for the sale. Manos later identified Allen in a police line-up.

Allen was booked and held on a $31,000 bond. Local arrest records indicate that he was released on 27th July.

The Palm Beach Sheriff's Office was not immediately available for comment when reached.

The attack is the latest in a series of notable bitcoin-related robberies perpetrated in Florida.

In 2014, a bitcoin mine based in Tampa was robbed by a former employee. During that incident, roughly $35,000 in bitcoin at then-current prices was taken, along with more than $150,000 worth of mining equipment.

But, Florida isn't the only place where in-person bitcoin sales have resulted in crime. For example, last summer, a New York man was robbed of more than $1,000 in bitcoin at gunpoint during an attempted sale.

Army knife image via Shutterstock

CrimeFloridaLaw

Original author: Stan Higgins

The price of bitcoin has benefited from macroeconomic uncertainty this year, rising more than 50% over the last six months as China devalued the yuan and the UK dramatically exited the European Union.

As the calendar rolls ahead to August, and excitement over these price drivers fades, market observers are beginning to wonder if further global events will benefit the digital currency's markets in 2016.

Against this backdrop, a Bank of Japan (BOJ) meeting approaching later this week has many digital currency market observers wondering how any new easing announced by the central bank could come to impact the price of bitcoin.

If the central bank uses additional stimulus, this move could place downward pressure on the yen's buying power, motivating market participants to flee the currency and purchase safe haven assets like bitcoin instead. Of course, the perception that this event could occur may be just as powerful given that the bitcoin price is often driven by speculation, in both senses of the word.

A majority of economists participating in a recent Reuters poll – as well as the most respondents in a survey conducted by Citi – indicated their expectation is that further easing will come from the BOJ's meeting, to be held on 28th and 29th July.

CoinDesk received similar responses when speaking with economists.

For example Usha Haley, professor of International Business at West Virginia University, stated that the market is still expecting "some form of easing" at the BOJ’s policy meeting next week, even if the extent of this stimulus is not clear.

Fiscal policy

Regardless of what methods of easing the central bank decides to use, more than one market expert emphasized the key importance of fiscal policy.

"Market expectations are such that the BOJ has to do something 'big' or they will risk disappointing the market,” said Jack McIntyre, CFA and portfolio manager for Brandywine Global Investment Management.

He said that he believes more than $10tn ($94bn) must be injected into the markets in order for the actions to be viewed "positively".

"That fiscal stimulus cannot be smoke and mirrors – it needs to go to actual increases in government spending," he emphasized.

Chris Burniske, analyst and blockchain products lead for investment manager ARK Invest, also stressed the importance of "aggressive fiscal policy," noting that it is one of the few remaining options left for spurring growth since Japan’s interest rate policy and quantitative easing have been ineffective.

Should the Japanese government decide to implement aggressive fiscal policy, this approach could increase the money supply and potentially spur inflation by lessening the yen’s buying power.

Expert predictions

While market observers seem to have high hopes for the Japanese government stimulus, they are divided in terms of how these initiatives will affect the yen.

Burniske spoke to this situation, emphasizing how the goal of "aggressive monetary and fiscal policy" is spurring growth, and along with it, inflation.

He said:

"Of course, inflationary fiat makes the long-term deflationary structure of bitcoin all the more appealing."

Greater BOJ stimulus might push the yen lower, Samuel Rines, senior economist and portfolio strategist for independent registered investment advisor Avalon Advisors LLC, told CoinDesk.

However, he suggested that markets have already begun to move to offset or capitalize on this action, meaning any impact from the announcement, including any benefit to bitcoin, could be limited.

"Markets have begun to price in some of the stimulus. So the amount of reaction there may be minute," he said.

While the aforementioned market observers spoke to potential yen weakness on the horizon, Oana Aristide, senior economist at Dun & Bradstreet UK, spoke to the currency’s strength.

"On the yen, our view is that most influences point to strength rather than weakness,” she said. "There is more monetary easing coming in Japan, as well as a substantial fiscal stimulus package, but none of these are novel for 'Abenomics'; it is worth noting that the BOJ's latest major move (switching to negative interest rates) actually resulted in a slightly stronger yen."

Finally, Aristide added that since Japanese officials have ruled out so-called helicopter money, her firm expects the yen to continue to experience volatility, but maintain a "strengthening bias" when compared to other major currencies.

Bitcoin impact

Digital currency market experts seemed, on the whole, a bit more reserved in terms of how they believed such actions would affect the bitcoin market.

Petar Zivkovski, director of operations for bitcoin trading platform Whaleclub, described further easing as "bullish" for bitcoin, although he asserted that "the BOJ’s actions are not catalytic enough to spark any significant change in trading activity in Japan".

McIntyre cast doubts on the idea that further BOJ easing would spur investors to flock to bitcoin.

"I don’t believe that a weak yen by itself drives the Japanese to shift money into bitcoin,” he said, adding:

"The more likely scenario would be a flight to safety that drives Japanese money offshore. Expect to see the Japanese retail investor chase yield in places like Brazil, Mexico, South Africa and New Zealand."

Currently, Japan is in a "dangerous situation" characterized by negative interest rates and balance sheets laden with cash that is not going to use, Burniske emphasized.

As the nation's officials make an effort to remedy Japan’s economic malaise, we will simply have to wait and see how effective they are.

The policy of other central banks – for example the Federal Reserve – will also play a key role in determining how strong the Japanese yen is relative to other currencies.

Should the Asian nation require significant stimulus going forward, such developments could help drive continued weakening of the Japanese yen, spurring market participants to flee the currency, and potentially, consider alternative assets instead.

Image credit: TK Kurikawa / Shutterstock.com

AsiaBank of JapanJapanPrices

Original author: Charles Bovaird

A series of recent departures at itBit have left the company looking much different than it did just a few months ago.

Following the release of itBit's enterprise clearing and settlement network Bankchain last year, three directors (and at least three other employees) have gone on to other endeavors. The exits appear to come amid a larger company transformation from bitcoin-only exchange to enterprise blockchain service provider.

Multiple former employees have confirmed with CoinDesk that at least seven itBit employees have transitioned to other companies in that time. Only six have updated their LinkedIn, while the seventh one has not replied to requests for comment. ItBit has also declined to comment.

Two of the three departing directors have moved onto investment companies in the digital currency space, with the third launching a recruiting firm.

After departing itBit earlier this month, the company's former director of institutional clients, Daniel Kim, took a position at Gemini Exchange. Also this month, itBit’s former global director of talent, Leanne Wong, departed the company and is now listed as a founding partner of MC Partners, a New York-based recruiting firm, on LinkedIn.

Further, former itBit director Bobby Cho departed the company in April and now works at DRW Capital, a subsidiary of Cumberland Mining Materials, the stealth startup that last year won 27,000 bitcoins from a US Marshals auction of Silk Road funds.

Another notable departure is itBit's former blockchain software engineer Michael Wozniak, who appears to have left blockchain altogether for a job at instant messaging service Snapchat.

While the departure of so many top-level employees in such a short period of time would be notable in any startup, there is reason to believe the moves coincide with a bigger-picture transformaiton at the company.

ItBit is currently seeking to fill eight vacancies, several of which, including its blockchain engineer and senior recruiter roles, appear to be replacements for the recent departures. But other hires focused on precious metals clearing and settlement indicate a new focus on Bankchain.

The recent spat of departures could be linked to plans itBit might have for its trading platform.

Sources told CoinDesk itBit may be considering closing or selling its exchange as early as September, with Kraken listed as possibly interested. The company could be considering a rebrand as Paxos, a name that comes from a group of consensus protocols.

The decisions certainly wouldn't be surprising given the state of the industry.

For the past year and a half, digital currency firms have been faced with questions of how to respond to the rising interest in blockchain and distributed ledger technology, an uptick that has coincided with declining consumer demand.

Departures image via Shutterstock

itBitStartups

Original author: Michael del Castillo