US Government Aims to Make Privacy Coins’ Use Case Obsolete

A branch of the United States Department of Homeland Security (DoHS) is researching the possibility of using blockchain forensic analysis tools to better trace privacy coin transactions.
Privacy No More: US Government Preparing Forensic Analysis Tools
Among the biggest concerns surrounding cryptocurrencies like Bitcoin are fears that the emerging technology could facilitate money laundering by rogue countries, terrorist organizations, and cybercriminals.
However, the United States government has increasingly bolstered their ability to trace blockchain transactions, and have even learned how to track Bitcoin transactions back to the source and identify the wallet holder, as was the recent case where the U.S. Treasury sanctioned two men from Iran over their involvement in ransomware attacks.
Related Reading: Iran Is Prepping National Crypto to Evade US Sanctions
Next on the government’s agenda, is to begin looking into privacy-focused cryptocurrencies, such as Dash, Zcash, Monero, and more.
According to a pre-solicitation document published by the DoHS’s Small Business Innovation Research Program. The document, discovered by The Block, the U.S. government is allegedly investigating ways to better track transactions on the blockchains of the aforementioned privacy coins.
The report does speak positively about some of the aspects of privacy coins, but calls attention to transactions of “illegal nature” that occur using said cryptocurrencies. The eventual goal is to build out a platform that law enforcement agencies, government branches, and even private financial institutions can use to analyze and enforce important anti-money laundering laws.
Since the document is just a pre-solicitation, the notice is “merely an opportunity for interested parties to comment on or request information about the attached topic areas,” and doesn’t mean that the government already has such tools in its possession. It does, however, prove that the DoHS has concerns over privacy coins and their potentially illegal usage.
Japan Bans Privacy Coins, Will the United States Follow?
Zcash, Dash, Monero, and many other privacy-focused cryptocurrencies allow users to hide transaction and address data from anyone outside of the sender and receiver.
Monero is the cryptocurrency of choice for most cryptojackers as cybercriminals are able to easily hide their tracks. Monero has also unseated Bitcoin as the most-used cryptocurrency on the dark web, so it’s no surprise to see that the United States is joining Japan in addressing concerns around privacy coins.
Related Reading: Japan’s FSA Grants Self-Regulatory Status to Crypto Industry
In Japan, where cryptocurrency-related theft has skyrocketed, the Financial Services Agency (FSA) has imposed a ban against any cryptocurrency exchanges in the country from offering privacy coins. The ban took effect this past June, and the ripple effect is just now reaching the United States.
Coincheck, which suffered the largest cryptocurrency exchange hack in history at the start of this year, was among the exchanges that were forced to comply with the FSA’s ban, and removed Monero, Dash, Zcash, and Augur’s Reputation coin.
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Time-Travel Crypto Once Backed by Trump-Appointed Acting Attorney General

Acting U.S. Attorney General Matthew Whitaker once was involved in an alleged scam promoting strange inventions, including a time-travel cryptocurrency.
Attorney General Matthew Whitaker Backed an Alleged Scam Company
Earlier this month, United States President Donald Trump ousted Attorney General Jeff Sessions from his post after Trump grew increasingly frustrated with Sessions’ recusal from the Russia probe. 
In his place, Trump appointed the Chief of Staff under Sessions, Matthew Whitaker, to the role of acting U.S. Attorney General.
The move sparked much controversy, with critics condemning Trump appointing Whitaker without approval from the Senate, which according to some violates the Constitution. And as is always the case with newly-appointed politicians, a witch hunt ensued and Whitaker’s shady past was uncovered.
Invention Scam Firm Worked on a Time Travel Cryptocurrency
Whitaker’s peppered history could have been erased, if the time-travel cryptocurrency he once backed ever came to fruition.
It turns out, Whitaker was once paid at least $10,000 in 2014 to serve on the advisory board of an invention company called World Patent Marketing. The newly-appointed Attorney General appeared in promotional videos, provided quotes in press materials, and in general showed a strong association with World Patent Marketing.
“As a former U.S. Attorney, I would only align myself with a first class organization,” he said in a press release issued by World Patent Marketing from back in 2014. 
Except World Patent Marketing ended up potentially being a complete scam, with the U.S. Federal Trade Commission filing a complaint against the firm over reports from consumers who went in debt or lost the entirety of their investments with the invention firm. 
The company was ordered by a Florida judge to close its doors for good and was forced to pay a settlement of $25 million.
Related Reading: Former Trump Advisor Joins Blockchain Startup
Among the invention scams World Patent Marketing was involved in, one such invention involved a cryptocurrency called Time Travel X that never saw the light of day.
Time Travel X was dubbed a “theoretical time travel commodity tied directly to price of Bitcoin.” In 2016, the company attempted to raise funds for the project by asking for bitcoin donations so World Patent Marketing could “make time travel a reality.”
As if a time travel cryptocurrency wasn’t strange enough, World Patent Marketing also announced a “masculine toilet” invention for “well-endowed men” so they can avoid having their genitalia touch toilet water. 
The firm also tried to bring Sasquatch dolls to retail, and suggested that Bigfoot does indeed exist, and that DNA evidence proved it.
Considering Attorney Generals like Matthew Whitaker are said to act as the “People’s Lawyer” for all citizens, the fact that Whitaker was involved in a company that was taken to court by the FTC for scamming consumers, is worrisome, and certainly calls Whitaker’s integrity into question.
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US Regulator Wants to Adopt Blockchain to Maintain Pace with Market Manipulators

The chair of the U.S. Commodity Futures Trading Commission (CFTC) has said that he wants to adopt blockchain to “keep pace with those who attempt to defraud, distort, or manipulate” financial markets.
CFTC Chairman Giancarlo Envisions Compliance Built into Business Operations Through Smart Contracts
J. Christopher Giancarlo spoke about the use of blockchain and machine learning for regulatory purposes at Georgetown University. The head regulator is confident the digital era will prove to be a positive factor to better oversee financial markets.
“These tools will become even more paramount as emerging blockchain technologies seek to decentralize markets or disintermediate traditional actors. It is critical that we have the ability to keep pace with those who attempt to defraud, distort, or manipulate.”
Giancarlo gave several examples of adoption of new technologies at the regulatory level.
These include “using machines to independently identify segments of the markets where concentration risks or unrecognized counterparty exposures are emerging and flag them for staff consideration and action” and “new machine-learning based surveillance tools” designed to “sniff out patterns of likely illegal trading activity or attempts to manipulate markets for enforcement analysis.”
The CFTC chair said the ongoing digital revolution in the world’s trading markets have far-ranging implications for capital formation and risk transfer. He added that he expects the majority of standard tasks to be managed by machines as automation technologies are paired with blockchain to standardize and distribute data to market actors and regulators.
“We can also envision the day where rulebooks are digitized, compliance is increasingly automated or built into business operations through smart contracts, and regulatory reporting is satisfied through real-time DLT networks. The machines here at the CFTC would have the ability to communicate regulatory requirements and consume and analyze the data that comes in through such systems.”
Giancarlo has recently stated that cryptocurrencies “are here to stay” and that many countries across the globe are hungry for functioning currencies, which shows there is a market for digital currencies. He is, however, skeptical about cryptocurrencies’ ability to rival the dollar or other hard currencies.
While the U.S. CFTC is yet to adopt blockchain technology to better oversee financial markets, the financial watchdog has won its first Bitcoin fraud action. A  New York federal court has ordered Gelfman Blueprint and its CEO Nicholas Gelfman to pay over $2.5 million in civil monetary penalties and restitution over their +$600,000 Ponzi scheme.
Related Reading: CFTC Chair: Cryptocurrencies Have a Future, They Are Here to Stay
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FCC Chairman Admits Antiquated Regulation May Hurt Emerging Blockchain Technology

Aijt Pai, U.S. FCC Chair, has said it’s a challenge to level the playing field between emerging technologies, including blockchain, and not disadvantage any of them.
US Telecoms Regulator Studies How to Evolve Blockchain
The chair of the Federal Communications Commission (FCC) – the government agency in charge of regulating radio, television, wire, satellite, and cable – told the Indian Express there might be a need for expanding the ambit of a telecom regulator to include the evolving tech.
“So one of the challenges is to figure out how we find a level-playing field that promotes investment and innovations for all these firms without disadvantaging any one of them. The second issue is that these are very dynamic industries and one can foresee in coming decades – things like artificial intelligence, machine learning, blockchain, quantum computing will have significant impact on how communications networks operate.”
While not having jurisdiction over these firms yet, the FCC is studying the matter and “how should [their] thinking about regulation evolve” as emerging technologies gain impact on the space. “No time ever has been more challenging than the 21st century”, he added.
In the United States, convergence has made a lot of the regulatory structure antiquated, Pai argued, adding that the Communications Act, which the FCC administers, was first developed in 1934 and subsequently amended in 1992 and 1996.
“That Act still contemplates that wireless service is separate from regular telephone services, which is completely separate from cable service, which is separate from satellite service. When it comes to broadband, all four industries are vigourously competing.”
The FCC chair, who was directly appointed by U.S. President Donald Trump, came to the limelight for his attempts to roll back net neutrality, which restricts internet service providers from arbitrarily controlling bandwidth access to specific websites and apps.
The issue may threaten the cryptocurrency ecosystem as, without net neutrality, an internet service provider, which is owned by a conglomerate decides to absorb an exchange, they can charge users extra or toggle down speeds.
Restricted access to cryptocurrency exchanges may result in lower industry growth, trading volumes, and digital currency market prices. New operators will face more difficulties entering the market and Bitcoin miners may also see profitability decline with higher rates for nodes or even bans from internet service providers.
In February 2018, the FCC issued a Notification of Harmful Interference to a New York-based Bitcoin miner who was ordered to turn off his mining rig – Antminer S5 Bitcoin Miner – for interfering with T-Mobile’s wireless network.
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US Securities and Exchange Commission [SEC] strikes again to suspend another cryptocurrency company

On 22nd October, a company in the United States came under the scanner of the Securities and Exchanges Commission [SEC] because of false claims of approved cryptocurrency custodian policies.
American Retail Group or Simex Incorporated, a Nevada based digital assets exchange, has had their services suspended till 3rd November by the SEC after the company claimed that it had partnered with an SEC qualified custodian for cryptocurrency transactions like Bitcoin [BTC]. Robert A Cohen, the Security and Exchanges Commission’s Cyber Unit enforcement Chief stated:
“The SEC does not endorse or qualify custodians for cryptocurrency, and investors should use vigilance when considering an investment in an initial coin offering.”
Another red flag that was raised by the SEC was the fact that Simex had started offering tokens which was apparently “officially registered in accordance with SEC requirements.”
This was not the first SEC crackdown of the month, with the latest suspension coming in the wake of the financial watchdog suing Blockvest, an ICO. Blockvest was reportedly conducting business under the false pretense of having SEC approval. The organization had stated:
“Blockvest and Ringgold also allegedly misrepresented Blockvest’s connections to a well-known accounting firm, and continued their fraudulent conduct even after the National Futures Association (NFA) sent them a cease-and-desist letter to stop them from using the NFA’s seal and from making false claims about their status with that organization.”
Frauds and illegal activities in the cryptocurrency industry have been under the radar of security agencies for quite some time now with several cryptocurrency companies being suspended or put to the axe. The SEC has been at the forefront of several of these cases with several more still in the pipeline.
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Report: North Korea Is Evading US Sanctions Using Cryptocurrencies

North Korea is reportedly ramping up the use of cryptocurrencies to evade US economic sanctions. It’s also alleged that the country is developing its own native crypto asset to further assist moving money across borders, according to a duo of financial intelligence analysts from Washington D.C.
North Korea Allegedly Uses a Mixer to Launder Money Using Crypto
According to a detailed interview with Hong Kong-based business news publication, Asia Times, independent financial analysts Lourdes Miranda and Ross Delston believe that North Korea has been using cryptocurrencies to circumvent U.S. led economic sanctions.

“International criminals everywhere prefer cryptocurrencies and the [Democratic People’s Republic of Korea] DPRK is no exception. Cryptocurrencies have the added advantage to the DPRK of giving them more ways to circumvent U.S. sanctions. They can do so by using multiple international exchangers, mixing and shifting services – mirroring the money laundering cycle,” explained Miranda and Delston.

The pair of analysts explain that North Korea would use a “mixer” also known as a “Laundry, Tumbler and a Washer” to move cryptocurrencies in such a way as to hide their tracks, which often includes sending the same type of cryptocurrency back to the original source.

“It is equivalent to requesting change for a $100 and receiving different denominations in return totaling a $100,” they said.

Miranda and Delston further warn that the DPRK could switch to a different cryptocurrency to further obscure the origin of funds.
North Korea Developing Their Own Cryptocurrency
Following the lead of Iran, North Korea may also be working on creating its own cryptocurrency for the purpose of evading economic sanctions.
Miranda and Delston suggests that having “their own cryptocurrency would also facilitate their ability to open online accounts under the guise of a non-adversarial nation using anonymous communication to conceal the user’s locations and usage on the internet.”
The two analysts believe that the DPRK could create its own wallet services so that it can move funds to and from European-based accounts that feature no personally identifiable information, in order to hide the fund’s origin country.

“For example, DPRK could open an online wallet using a Russia-based service, transfer its cryptocurrency into a Bulgaria-based wallet service and then transfer it again into a Greece-based wallet service, all through anonymous communication and using their own blockchain.”

After the funds have moved through a number of anonymous accounts, the cryptocurrencies would ultimately make their way to European exchanges that have relationships with a U.S.-based bank where they’ll be converted to USD.

“Voilà, the DPRK now has U.S. dollars with none of those pesky sanctions attached.”

Like North Korea, both Russia and Iran have been said to be using cryptocurrencies in order to evade international economic sanctions. Last month, Iran released the first details about its own native cryptocurrency, the digital Rial.
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