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Wedding Bells – The Uneasy Marriage Between the Financial and Crypto Sectors

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In many cultures, an arranged marriage is a union with the bride and groom chosen by family members, typically parents.  You find similar arrangements in the financial sector, where a financial advisor proposes financial partnerships or mergers between two companies. Over the last few years, the financial and crypto sectors have been on a path best described as an arranged marriage.

Regulators want the two groups to work together to improve the financial ecosystem. Crypto advocates have been unabashed about remaining unattached. They view themselves apart from the financial community. There is no need for a union. The fundamental obstacle is that the banking sector needs innovation and operability, while the crypto sector needs capital and liquidity.  

Table of Contents.

The Proposal

The move to digital, accelerated by COVID-19, demonstrates an expanding use case around cryptocurrency beyond payments and speculative investments. Virtual assets could reduce recordkeeping costs and improve ownership transparency when integrated into the financial economy. Cryptocurrencies can replace cash with associated business applications for the consumer. Virtual assets can add openness while providing a safeguard against theft.

Unsurprisingly, the Financial Action Task Force (FATF) has been behind this convergence. Without its guidance on handling virtual asset service providers (VASPs), the licensing and registration would not have been possible. Governments such as Singapore, Japan, Switzerland, and elsewhere are enacting VASP regulations. Those countries not moving forward will be pressured to comply.

12-month Plan

Plans are in place. The FATF’s 12-month period applies pressure to countries and the crypto industry to adjust to the new regulatory environment. Just as a wedding needs preparation, the crypto industry needs uniformity in the travel rule and finds common ground on interoperability. This step is required to drive the industry ahead. The well-meaning parents are coaxing the hesitant groom and the skeptical bride together, each reluctant of the other.

The Union

An example of this move is Ron Hose, the former CEO of Coins.ph, a new role in the Philippines’ UnionBank of the Philippines. Coins.ph, one of the licensed virtual currency exchanges (VCE) in the Philippines, has gone from being a payments disruptor to a regulated entity over its short life.[1] Ron can be considered the outsider who is now on the inside.

This action by UnionBank is a shrewd calculation of the growing relevance of crypto payments to the financial sector’s appreciation for new business and revenue models. The Philippines’ economy benefits from inward remittance flows. Ron’s expertise would help UnionBank get ahead of its competitor. It would not surprise me that more crypto leaders are appointed to Bank boards.

From a banking perspective, the new technology is thought-provoking, even seducing. However, the collapse of net interest margin and fees has banks looking for revenue sources. Crypto assets are becoming appealing, especially as regulators have signaled their acceptance of the new technology.  Regulations and licensing have made these assets attractive. 

Technology and Financial Crime

The perception of the crypto industry’s risks and its ability to manage those risks remains a drawback. The libertarian narrative is distracting. In a recent survey conducted by ACAMS, seventy percent (70%) of total respondents[2] remained concerned that cryptocurrencies are used to facilitate financial crime. 

Indeed, media stories have highlighted the use of crypto to facilitate money-laundering, dark web activity, the purchase of illicit goods, the involvement of rogue actors and terrorist organizations, and other financial crimes. 

The reality is that new technologies have historically been exploited by criminals when introduced. Criminals used ATMs, credit cards, and electronic payment systems when first introduced. Virtual currency is another technology available to be exploited, but organized crime prefers large financial institutions and their international networks because they accommodate size and speed.

Changing Perceptions

While stories such as the CFTC’s indictment of BitMEX and their principals may catch readers’ attention, regulators are moving the industry to adopt various risk management practices.[3] The charge highlighted the failure of anti-money laundering procedures, but the move is about correcting perception.[4]

Elevating Vivien Khoo, a seasoned finance professional with compliance experience, is a shrewd move, one to calm regulators and investors. Regulators want the crypto industry to adopt improved internal controls and risk management practices to demonstrate professionalism.

Consolidation

Not all firms will be able to adjust. Many start-ups lack the capital to build the internal frameworks. Some firms may not be able to attract the talent needed to craft compliance and risk controls.  Inevitably, this action will drive consolidation within the crypto industry. Financial institutions will acquire crypto firms and integrate them into their suite of digital products, and crypto firms will merge to streamline processes and reduce costs.

Indeed, some in the crypto industry will lament the loss of independence, as every bride must ponder, but trust and transparency are vital to every marriage. The consolidation within the ecosystem will drive interoperability and standards.

Perception & Reality

There are concerns that the industry must address, but changing the perception of cryptocurrencies is one of the first steps to bringing about wider adoption. The recent RUSI-ACAMS cryptocurrency survey noted that “half of all respondents believe cryptocurrency exchanges are unprepared to deal with the aforementioned cybercrime activities.”[5] What if the perception of crypto-related risk by financial institutions is wrong?  

The industry is maturing fast with compliance talent migrating from financial institutions. One only needs to see the US regulatory action upon BitMEX and Coin Ninja as a broader signal upon the market. The crypto industry will be regulated and must address financial crime perceptions and realities. 

Bitcoin & Banks

There is a massive divide between compliance officers in financial institutions and crypto firms, reflecting an underlying bias.  Jamie Dimon’s position on crypto may reflect this evolution. In the beginning, JPMorgan and Jamie Dimon were against bitcoin and the new technology, but flirted with the idea before committing the endeavor.

They have earning power for a financial institution that already manages financial crime risk. Subsequently, look for a sea change in how compliance officers view crypto-assets in financial firms. 

The reality is that financial institutions have been the target of most sophisticated money laundering syndicates and will always be the target. Crypto-assets are just variation to an existing risk.

This article is first published on BitPinas: Wedding Bells – The Uneasy Marriage Between the Financial and Crypto Sectors


References:

[1] Mislos M., “Crypto Wallet Coins.ph Former CEO Ron Hose is UnionBank’s New Director.” BitPinas, 28Sept. 2020, Retrieved from https://bitpinas.com/news/crypto-wallet-coins-ph-ceo-ron-hose-unionbanks-new-director/

[2] “Banks, governments and crypto industry divided on cryptocurrency risk, new global survey reveals.” Centre for Financial Crime and Security Studies (RUSI), 28Sept. 2020, Retrieved from   https://rusi.org/rusi-news/banks-governments-and-crypto-industry-divided-cryptocurrency-risk-new-global-survey

[3] Palmer, D., “BitMEX CEO Arthur Hayes Leaves Role After US Charges.“ Coindesk, 8 Oct. 2020, Retrieved from https://www.coindesk.com/bitmex-ceo-arthur-hayes-leaves-role-after-us-charges

[4] “CFTC Charges BitMEX Owners with Illegally Operating a Cryptocurrency Derivatives Trading Platform and Anti-Money Laundering.” Commodity Future Trading Commission, 1Oct. 2020.  Retrieved from Violations https://www.cftc.gov/PressRoom/PressReleases/8270-20.

[5] Izenman, K., & McDonell, R., “Cryptocurrency Risk & Compliance Survey,” ACAMS-RUSI, 2Oct. 2020, p.29. https://www.acams.org/en/ACAMS-RUSI-Crypto-Survey-Report

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Source: https://bitpinas.com/regulation/wedding-bells-financial-and-crypto-sectors/

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The Curious Case of a Conflicted Bitcoin Bearish Wedge

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Bitcoin is stuck below $20,000.

The flagship cryptocurrency has attempted to break above the psychological resistance level multiple times in the last two weeks. In one of the instances, it reached as far as $19,915 only to face a bearish assault at the new record high that pushed its price lower by $2,000. It is evident that traders’ profit-taking behavior goes wild when Bitcoin closes towards $20,000.

Bitcoin Wedge

But looking from a wider perspective, the entire range between $19,500 and $20,000 prompts traders to exit their bullish positions for a short-term profit. In late November, the BTC/USD exchange rate made two back-to-back attempts to break above $19,500, but it succumbed to higher selling sentiment near the level, falling to as low as $16,200 later.

A pullback ensued, and the price again faced the same bearish bias near 19,700 — a development from $19,500, nonetheless. And now, the $19,900-area is giving the same vibes, having been crashed the price to $18,109 upon its latest test.

The price behavior has left Bitcoin in a sequence of modestly increasing higher highs and lower highs. Envisioning them together makes it look like that they are forming a Rising Wedge.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin Rising Wedge pattern in development. Source: BTCUSD on TradingView.com

In retrospect, traders see Rising Wedge as a bullish-to-bearish reversal pattern. So it typically happens the price ascends inside the Wedge range but breaks below its support trendline eventually. If accompanied by higher volumes, the negative breakout crashed the price by as much as the maximum distance between the Wedge’s upper and lower trendline.

Bitcoin’s current Rising Wedge pattern’s height is $3,249. Depending on where it breaks lower from, its price would likely fall by roughly $3,000. That would mean a plunge towards $17,000 — at least.

But There Is A Catch

The Wedge’s upper trendline is almost flat, with the difference between higher high levels close to $200. Some traders can also assume that it is a horizontal resistance level. If true, it would throw the entire bearish reversal theory, as discussed above, into a bin.

A horizontal line makes the entire Bitcoin structure looks like an Ascending Triangle. It is a continuation pattern wherein the asset in concern typically continues in its previous trend’s direction with a breakout above the upper trendline. An ideal bull target is as much as the height of the Triangle.

That means Bitcoin price — again — expects a move worth $3,000-3,249 but to the upside. It puts the cryptocurrency’s bull target at around $23,000.

So far, fundamentals favor Bitcoin.

The inflation narrative sticks because of the Federal Reserve’s likelihood of buying short-dated bonds and corporate debts amid a low-interest environment. On the one hand, excessive US dollar liquidity prompts investors to dump the greenback. On the other, the prospects of earning lower yields divert their attention to riskier assets like Bitcoin.

That explains why the cryptocurrency’s Rising Wedge pattern appears less threatening.

Source: https://bitcoinist.com/the-curious-case-of-a-conflicted-bitcoin-bearish-wedge/?utm_source=rss&utm_medium=rss&utm_campaign=the-curious-case-of-a-conflicted-bitcoin-bearish-wedge

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Hackers Demand 200 Bitcoin Ransomware After Compromising Leading Israeli Insurance Company’s Sensitive Data

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A notorious hackers’ group called The Black Shadow has compromised one of the largest insurance companies in Israel – Shirbit. The attackers have already released sensitive client documents and have demanded a ransom in bitcoin, which could rise to $4 million by the end of the week.

Israeli Insurance Company Hacked

According to a local media outlet, the first confirmation of the hack came on Monday evening. Representatives of The Black Shadow group posted an initial batch of compromised documents on a Telegram channel.

Shirbit had contacted the National Cyber Directorate and Capital Market Authority to open an investigation. Shortly after, the organizations confirmed the breach and indicated that the hackers have also leaked numerous insurance details, alongside the initial documents.

According to the report, Shirbit has many high-profile customers, including government employees. Company CEO Zvi Leibushor said that the safety of its clients is Shirbit’s top priority.

“Shirbit has invested millions of shekels in securing databases and protecting against cyber-attacks and meets all the stringent regulatory requirements in this area.” He added that the firm has invested “all resources and efforts needed for an effective safe and rapid solution to this cyber-attack, whose real goal is to try to harm the Israeli economy.”

Demand Requested In Bitcoin

After releasing a small part of the compromised documents, The Black Shadow reps have contacted the victims to request 50 bitcoins (about $960,000 with today’s prices).

However, in case Shirbit failed to pay the attackers within the first 24 hours, the demand would double to 100 bitcoins. The procedure will repeat and double to 200 bitcoins if another 24 hours pass without payment.

Furthermore, the hackers threatened the insurance company that if it fails to transfer the funds by the end of this week, they will sell all compromised data to other bidders.

It’s worth noting that numerous other Israeli companies and high-profile individuals have recently become victims of similar hacks and demands.

CryptoPotato recently reported that 20 Israeli crypto executives, all clients of the local telecommunications giant Partner, were hacked by stealing their SMS messages.

Another coverage informed that a new type of ransomware attacked called Pay2Key has been executed against several Israeli companies in the second part of 2020. The perpetrators had requested the demand in bitcoins, similarly to the Shirbit hack.

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Source: https://cryptopotato.com/hackers-demand-200-bitcoin-ransomware-after-compromising-leading-israeli-insurance-companys-sensitive-data/

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Bitcoin Price to Hit $36,000 in 2021: Kraken Crypto Sentiment Survey

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From what happened in the last couple of weeks, it appears that the crypto bull market is upon us. Bitcoin has been consistent with its volatility-induced rallies, and this is infusing confidence in investors.

So much, so that VIP clients in Kraken’s latest Crypto Sentiment Survey say that BTC will skyrocket to about $36,000 in 2021. They also feel that ETH could revisit its previous highs of $1500.

Bitcoin And ETH To Trade At Average Prices Of $15K and $549 By 2020 End

The latest Kraken Crypto Sentiment Survey covers investor sentiment for the second half of 2020. The exchange had already conducted a similar survey back in March this year. But then investors were way more optimistic about BTC and ETH price growth by December.

Now, the same respondents have retracted their bullish calls for bitcoin and ether (ETH) this year. According to the latest numbers,

The average bitcoin price target among 309 responses fell -35% surveyover-survey to $14,866, well below February’s average of $22,866. The median price target also retraced -28% from $19,424 to $14,000, and the most commonly cited price target was $15,000, down -25% from $20,000.

With respect to ether (ETH), the average price target among 289 responses was $549, off -32% from the previous survey’s average of $810. The median price target was unchanged at $500 and the most frequently cited price target was $500, up +66% from $300.

At 72 percent, traders and investors (down from 81 percent when the survey was conducted in March) comprised a majority of the survey responses. 18 percent of responses came from Institutions (broker, custodian, family office, hedge fund, lender, market maker, private equity firm, proprietary trading firm, or venture capitalist).

And the rest 4 percent – from crypto service providers (ATM, exchange, lender, payment processor) and miners. As compared to March, the researchers at Kraken anticipated a lower price growth optimism from the said respondents since the year is so close to its end.

The Outlook For 2021 Remains Super Bullish

When asked about how they see bitcoin and ether prices in the next year, respondents didn’t shy away from expressing their mega bullish calls. Survey participants called for an average bitcoin price target of $36,602 in 2021. Some put the median bitcoin price target at $25,000, but a lot of folks (approximately 61 percent) felt if not anything else, BTC will at least hit $20,000.

A small section of respondents reported hopium-induced ultra bullish calls.

Approximately, 8% of respondents provided a price target greater-than-or-equal-to $100,000, roughly 20% of respondents reported a price target greater-than-or-equal-to $50,000…

Survey participants were very optimistic about ETH’s outlook as well in the next year. This sentiment came from the discussions around Ethereum’s network upgrade and the growing popularity of the DeFi ecosystem. Respondents think ETH will trade at an average price of $1454 in 2021. Also, at the same time:

Close to 59% believe that ether will, at least, hit $800. Additionally, 22% of respondents see ether surpassing its previous all-time high of $1,595 set in early-January 2018 and just under 92% see ether, at the very least, trading higher than current price in 2021.

What becomes evident from the aforementioned numbers is that participants in a price prediction survey tend to project bullish figures for a longer-term.

Will Bitcoin(BTC) and ether (ETH) hit the above price targets in 2021? That still remains to be seen.

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Source: https://cryptopotato.com/bitcoin-price-to-hit-36000-in-2021-kraken-crypto-sentiment-survey/

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