Daily Archives: August 1, 2017

Is A Cryptocurrency Like A Stock? The SEC Weighs In – Seeking Alpha

Posted: August 1, 2017 at 5:52 pm

When it comes to regulation, what exactly is a cryptocurrency? Is it a currency? Is it a piece of software? Is it more like an equity? And if it is an equity, does that mean it should be regulated like any other security?

The U.S. Securities and Exchange Commission (SEC) recently weighed in. How regulators like the SEC define and treat cryptocurrencies is important because it affects both the value of cryptocurrencies, and how likely it is that blockchain technology will thrive in a particular jurisdiction. For example, if a countrys regulatory body decides that cryptocurrencies should be banned, then this will drag down prices (depending on the size of the country) and blockchain technology companies will avoid setting up shop or investing there they wont feel welcome.

The SEC has been notably quiet on the subject of cryptocurrencies. Other regulatory bodies and governments, primarily in Asia, have been extremely proactive in outlining how they will treat and regulate bitcoin and cryptocurrencies as an asset class. In May, I told you that the SEC would eventually step into this market, "especially as the financial stakes increase". Now, it looks like the SEC is on the ball.

Earlier this week, the SEC issued the results of an investigative report into the details surrounding a cryptocurrency initial coin offering ("ICO") called the DAO in the first half of 2016. An ICO is when a new cryptocurrency token is offered for sale to the public, similar to an initial public offering ("IPO") in the stock market.

The DAO intended to be a fully decentralized cryptocurrency venture capital fund. It would raise money (in the form of a cryptocurrency called ether), issuing DAO tokens in return. It would then allocate those raised ether funds to various business ventures by way of voting amongst the DAO token holders.

The DAO raised US$150 million worth of ether from some 11,000 investors. But then disaster struck. Despite assertions that the DAOs code had been analyzed by one of the worlds leading security audit companies and that no stone was left unturned during those five whole days of security analysis, DAO was hacked. US$50 million of ether was stolen.

The SECs investigative report wasnt about trying to identify the culprit behind the attack. Instead, it was focused on whether or not DAO tokens constituted a security (that is, a stock) and should therefore be regulated under existing securities laws.

The straightforward answer is maybe. The fact is, every cryptocurrency token has its own attributes. As the SEC report put it;

U.S. federal securities law may apply to various activities, including distributed ledger technology, depending on the particular facts and circumstances, without regard to the form of the organization or technology used to effectuate a particular [cryptocurrency] offer or sale.

In other words, it just depends. But on what?

To answer that, we turn to the Howey Test, which was created by the Supreme Court as a means of determining whether certain transactions qualify as investment contracts.

[The test refers to a precedent from a case the SEC levied against Florida companies W. J. Howey Co. and Howey-in-the-Hills Service, Inc. that sought to determine whether or not a particular land-related deal constituted an investment contract under the Securities Act of 1933.]

If certain transactions meet the criteria, then they are deemed securities and subject to a raft of regulatory requirements. Without going through all the checks, Ill just include some of the pertinent ones that the SEC included in its report.

So, investing money (cryptocurrencies included) in a token with an expectation of profit (dividend or simple value increase) derived from the managerial efforts of other people points to a cryptocurrency being a security, and that its required to be regulated as such.

The report was a warning. The SEC stated that charges would not be brought against anybody involved with the DAO. But that the report serves to caution the industry and market participants.

Given that there are no charges to be brought against the DAO, its likely that existing cryptocurrencies are safe from securities regulation for now, although that wont be the case for long. The primary focus of the SEC will be newcomers to the market, with the starting point being the Howey Test criteria, some of which are listed above.

There has been little to no impact on the broader cryptocurrency market from this report from the SEC. As someone whos personally been involved in the cryptocurrency token distribution process, the Howey Test is already a key component of any legal diligence on a cryptocurrency.

However, some cryptocurrencies are flying a little too close to the sun, especially those that specify dividend-style payouts for token holders. The SEC is very clear that just because something is virtual, it doesnt exempt it from being a security. And when cryptocurrencies inevitably start falling under SEC jurisdiction, investors (particularly U.S. investors) will need to ensure that whatever they are buying is compliant with U.S. securities laws.

So you shouldnt invest in cyrptocurrencies on the assumption that they arent (or wont ever) be deemed securities. And when you evaluate different blockchain companies that issue their own cryptocurrencies, check the characteristics against those Howey Test criteria. SEC regulation was always expected to occur sooner or later, and this SEC report didnt contain anything out of the ordinary it really just reiterated the criteria with which cyrptocurrencies will be measured with when it comes to regulation.

But I suspect we will start to see more global cryptocurrency offerings that specifically prohibit U.S. investors because nobody likes having to deal with U.S. regulations if they can avoid it. Still, I dont envision this having any big impacts on general cryptocurrency prices in the immediate future.

Disclosure: I am/we are long BITCOIN.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Elad Gil and Silicon Valley’s bright future in cryptocurrency, genetics … – TechCrunch

Posted: at 5:52 pm

A disappointed Pokmon GO Fest attendee has proposed class-action lawsuit againstNiantic

Elad Gil is running around the Color Genomics office when I come to meet him for a little sit-down. The place is full for a Friday afternoon. Theres a worker taking calls on the couch in the front and plenty of others pacing about in the background.

The office is tucked away in an unassuming industrial area of Burlingame, California, in a building that reminds me of some 60s-style government structure. Color is easy to spot: First suite on the first floor and the only one with, well, bright color.

Gil offers me a water and we sit down in a little conference room. Jokingly, he says maybe he can do something funny for the featured image for my article like pretend to hold up the color wheel logo. Katie would never let me do that, he says, referring to his chief marketing officer and ex-Twitter employee Katie Jacobs Stanton. Hes nerdy funny. I like that.

Gil came to Silicon Valley with impressive academic credentials, including a degree in mathematics, another in molecular biology and a PhD in biology from MIT. It was 2001, and he had hoped to make a dent in the universe. But the timing was off. The country was already headed toward an economic downturn, then 9-11 happened.

He was at a telecom company that quickly grew to 150 people and shortly after shrank to a tenth of the size in five rounds of layoffs. Gil was cut in the third round.

That was a turning point for him.

All these people helped, he said. Like big brand-name VCs were referring me to companies just to help. They were like, Everythings collapsing. Youre some random person who showed up with a PhD in biology. You have no job prospects.

He went on to hold prominent positions at Google and Twitter and now as a co-founder in Color Genomics. Hes also an investor in several well-known startups, including Airbnb, Square, Stripe and Pinterest, and is in a position, which hes known to readily use, to give back to Silicon Valley in much the same way.

But, a dark cloud has been hanging over the Valley lately. News of several incidents of sexual harassment and sex discrimination of female founders have toppled VCs once seen as demigods and caused some to lose hope in the dream.

SB: Ive heard people say Silicon Valley is over. Theyve kind of almost lost faith in their heroes, and then theres all these other little pop-up satellite Silicon Valley-esque cities starting to come up. Do you think Silicon Valley is over?

EG: Oh God, no. I think its best days are ahead of it Do you know the last time they said that Silicon Valley was over?

SB: When?

EG: Theres two times.One was in the early 90s where they were like Its over. Theres nothing left to be done.

SB: At the height of the semiconductors.

EG: Yeah, because all the semiconductor stuff was really sort of like 70s and 80s. And then in the early 90s 91, 92, 93 theres the internet. And I was talking to somebody who was really prominent in the internet wave, and he was like I moved out here in like 93 and everybody thought it was over.

Literally, that was the thing. They were like The best times are behind us. All the stuff that could be done has been done. Its over. And then a small group of people were like, Lets do stuff on the internet. Others were like Thats insanity. Like the internets a stupid toy thing that connects five universities. Who cares? Then of course, Netscape happened, and then theres a wave of innovations, and then in the bubble that I moved into with my perfect bad timing, the collapse I moved into. In that period, everybodys like Oh, theres nothing interesting on the internet, and we have to go back to hard tech. And Kleiner Perkins got into clean tech, and all these people were talking about nano tech, and it was like Silicon Valley is over, and theres nothing to do. We need to find new industries. Thats literally what happened.

Then all the social waves happened, and the mobile waves happened Just like theres a business cycle, theres a venture cycle, and innovation cycle. You end up with these gaps, and I think were just going through a period where theres less obvious things.

Interjection: We started talking about cryptocurrencies, ice cream, health tech and whats next in Silicon Valley. Ive cut a bunch of this short for brevity.

EG:I basically think the last six months have been cryptocurrencys Netscape moment, and I think were still trying to figure out whats Google, and whats PayPal, and Yahoo, and what to keep in with this first wave.

SB: [Cryptocurrency] scares people, especially when its very new.

EG:Totally. You remember the first internet. People were like Oh, nobodys going to buy anything on that. Theyre not going to put a credit into a website. Thats madness.Now weve got Instacart, Amazon

Can I say something, and then argue that I never said it when you have a tape? Can I do that purposefully?

SB: Okay. What do you want to argue?

EG: I never said I like chocolate ice cream. I like chocolate chip, or something like that.

SB: And Ill be like No, on the record. This is where he said it.

Okay, so kind of wrapping this up. Where do you see Color fitting in all of this?

EG: Yeah. I think Color was sort of part of a very early first wave of the visual data area So really our focus is on how do you unlock information thats sort of locked up for people, make it something they can actually use to help manage their own health.

SB: People might say it makes it a lot harder if you have to go through your physician first to get this information. I think thats kind of the allure of these at-home health tests a lot of the time.

EG: I think it depends on how much friction you can take out of the physician process, but also the flip side of it is, if physicians are telling people that they should consider it, thats actually a really powerful way, as well, for people to participate. So I think there are sort of two sides of the same coin.

As an Ashkenazi Jew, I remember going to my doctor and like Hey, should I be taking these genetic tests for cystic fibrosis and Tay-Sachs and all this other stuff as a carrier? And he was like, Oh yeah. Youre Jewish. Sure. You should do it.

SB: Sure. Gotta be proactive.

EG: But I had to bring it up, right? Its something thats often recommended for Ashkenazi Jews to do. So, were basically trying to create an online version of that, where youre still working with the physician but theres different ways for you to work with him.

SB:Where do you think people can innovate further in the health tech space right now? What would you like to see?

EG: Yeah. Um, thats a great question. I think ultimately, theres so much data available ambiently through peoples bodies This company Cardiogram that I mentioned. Im a small investor there, from a disclosure perspective. Thats a good example of where youre just ambiently recording and then telling people that they may have had a heart attack. I think that those are some themes that are really intriguing.

I think the top part in healthcare is that the people who are often benefiting the most from things arent necessarily the people making the buying decisions. There are some things at a low enough price-point, so that really changes the adoption rates of different tested products. Thats one obstacle, in terms of larger-scale adoptions.

SB: Okay. I think well end it on that.

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investFeed switch to cryptocurrency token sale brings mainstream demographics on board – Crypto Insider (press release) (blog)

Posted: at 5:52 pm

This is a sponsored piece.We encourage thorough due diligencefrom our readers before acting on any given information.

investFeed is a New York based community powered social trading network making the switch from US equities to cryptocurrency. Marketing itself as the worlds first social investment network for the cryptocurrency community, investFeed aims to develop cryptocurrency infrastructure for the industry. This is establishing a much-needed framework ready for the mainstream adoption of cryptocurrency.

Their pivot to digital currencies is described as a key move to cater to an exponentially growing industry, Weve been a social investment platform since 2014 and over the last few months weve had a huge demand from our user-base to integrate cryptocurrencies onto our platform We really see that [cryptocurrencies] are the future going forward, said Ron Chernesky, investFeed CEO on the live Post-Cable Network, Cheddar. Keeping the momentum and buzz around the token sale up, last week the investFeed team announced that they brought on ex-NFL football player, Jovan Haye, as an investor as well as emerging technologies and blockchain-focused VC entrepreneur, Steven Neryaoff, as an advisor.

On the point of corporate interest, one of Crypto Insiders recent pieces noted that there was huge increase in cryptocurrency attention from the Big Four accounting firms. Deloitte, EY, KPMG and PwC reps all stated that both existing and prospective clients are beginning to ask questions about initial coin offerings (ICOs), the process by which public blockchain technologies can be leveraged to create custom cryptocurrencies that are subsequently sold to fund projects. With investFeeds platform supporting cryptocurrency trading infrastructure, it has the potential to appeal to big enterprise looking to jump into the market.

CTO Drew Freeman was quoted on Finextra to have said, The switch from equities to cryptocurrencies will also target a millennial user base that has shown disinterest in traditional investments. So while the big movers of the corporate world are turning their focus to the crypto market and enterprise-facing players, investFeed has the potential to also capture the attention of the sizable youth demographic, empowering them through the decentralization featured in blockchain technology capitalizing on the best of both worlds in the process.

Having been involved in US equities trading since 2008, one thing that can be said for investFeed is that their team has a track record of operating as a cohesive unit which is in sharp contrast to the majority of token sale groups capitalizing on the ICO bandwagon. The platform will introduce old-school and traditional stock traders to the fast-paced world of cryptocurrency market investment in a familiar way through the investFeed skin and tools. Despite the ICO craze slowing down, investFeed has a high possibility of reaching its target they have a solid track record, a detailed whitepaper and a reasonable hard cap at 28,000 ETH. At the time of publishing, investfeed has raised 35% of its limit, and has until August 7th, 2017 when the sale closes out.

Featured image sourced from Wikimedia commons

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Bitcoin has split, and there are now two versions of the popular cryptocurrency – Quartz

Posted: at 5:51 pm

Bitcoin has just undergone a contentious hard fork that cleaved it into two separate entities for the first time in the cryptocurrencys nearly nine-year history. In addition to the first version of bitcoin, there is now a new cryptocurrency called bitcoin cash that offers an eight-fold increase in transaction capacity.

For the last several years, the bitcoin infrastructure has been struggling to handle a growing number of transactions, and technical experts have said a new implementation of the currency will solve its back-logging issues.

That is what bitcoin cash promises. Like the original bitcoin, it uses the currencys principal innovation: the blockchain, an immutable ledger of all the transactions ever performed with the cryptocurrency. Now that there are two versions of the ledger, however, there could be some practical problems, like vanishing coins, and philosophical ones, like a communal agreement on which blockchain represents the one, true, bitcoin.

The first bitcoin cash block on its own blockchain was successfully created at exactly 2:12 p.m. ET, and the new currency is already trading at $210 USD per coin.

Read next: Bitcoins civil war threatens to blow up the cryptocurrency itself

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The Problem with Bitcoin Price Charts (Explained in Two Charts) – CoinDesk

Posted: at 5:51 pm

Last week, I wrote about the different methods used to calculate and express daily price changes in stocks and cryptocurrencies.

The big takeaway? Since cryptocurrencies trade in a 24/7 fashion, there is no closing price to quote. Instead, daily price changes are calculated by comparing the current price of the asset to the price of the same asset 24 hours earlier, and calculating the percent change between the two numbers.

Using this trailing 24-hour percent change calculation, however, can produce some very strange results.

As I wrote last week:

"What's the practical effect of this rolling denominator? In the simplest terms, it means that if you're just looking at the percentage change over the last 24 hours, you can't tell whether you're seeing real-time price movement in the cryptocurrency or just residual price volatility from the day before."

Today, I want to show you two examples of just how wildly distorting that rolling calculation can seem, using two hypothetical charts depicting bitcoin prices over a 48-hour timeframe.

In our first example, we have a chart that shows the price of bitcoin rising about 3percent in Day 1, as depicted by the yellow bar.

On Day 2, bitcoin essentially goes sideways for 24hours.

Now, take a look at what happens to the 24-hour price change during Day 2, as shown by the dark brown bar.

When Day 2 begins, the 24-hour change displays an increase of just over 3percent. As the day progresses, however, the 24-hour change begins to "roll off" until this figure hits zero on at 11:59pm.

Of course, all the 24-hour price change depicted by the brown bar during Day 2 happened when there was very little change in the value of bitcoin: the movement in 24-hour price change came entirely from "legacy" price volatility from the prior day.

The example shown in the second chart is even more unusual.

On Day 1, the price of bitcoin is very volatile.

Between 3 a.m. and 5:30 a.m., the price of bitcoin spikes up about 18percent on a straight price basis then bounces down a bit, between 6 a.m. and 7 a.m., and finally crashes over 20 percent between 11 a.m. and 4 p.m.

On Day 2, bitcoin trades basically sideways all day.

As the price stays flat, however, the 24-hour price change bounces all over the map. First, the 24-hour price change crashes more than 15 percent, then it spikes up over 8 percent, crashes down around 15 percent again, and ultimately "rolls off" at zero at day's end showing absolutely no change over the course of the 24-hour period.

For investors especially retail investors new to the cryptocurrency space it's easy to see how the 24-hour percent change convention could be confusing.

If you're new to trading, you may want to check your charts twice.

Trading chartimage via Shutterstock. CoinDesk charts and data via Alex Sunnarborg

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at [emailprotected].

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Bitcoin to surge nearly 80% to $5000, ethereum to double, Standpoint’s Moas predicts – CNBC

Posted: at 5:51 pm

After testing out digital currencies earlier this month, independent stock research analyst Ronnie Moas on Sunday published the first two parts of his 122-page report on bitcoin and other digital currencies.

"In my view, the genie is out of the bottle, and cryptocurrencies will continue to rise and take market share away from stocks, other precious metals, bonds and currencies," Moas, founder of Standpoint Research, said in the report.

"I think investors should take a shot on this and hold for a few years. If you lose a few bucks, at least you took a shot," he said. "In life, you miss every shot that you do not take. It will probably be more upsetting to watch it (from the sidelines) go up another 1,000%."

Moas gave bitcoin a $5,000 price target for 2018, reflecting nearly 80 percent upside from Monday's price of about $2,800. He also expects rival digital currency ethereum to more than double in value from just under $200 to reach $400 in the next year, and another digital currency, litecoin, to double from about $40 to $80.

In the next week or two, Moas said he plans to issue the third part of the 122-page report about how a fourth and much smaller digital currency could rise a few hundred percent in the near future.

The stock analyst said he's bought 10 of the top 20 digital currencies by market capitalization in order to be diversified, marking the first time in 20 years he's put money into his own recommendations.

"In my view, 10-15 years from now, the charts on a few of the top 20 names will look like the Amazon, Apple, Tesla, Facebook, Netflix and Google charts look today," Moas said in the report.

Top 20 cryptocurrencies by market capitalization

Source: Standpoint Research

Moas' report comes just before a possible split in bitcoin Tuesday, if some developers go ahead with a scheduled upgrade known as Bitcoin Cash. Direct owners of bitcoin will then hold two versions of the digital currency.

"The market is telling you right now that we will get through this event tomorrow," Moas told CNBC in a phone interview Monday, noting bitcoin traded close to its all-time high.

The digital currency hit a record $3,025 in mid-June, fell to $1,837 in mid-July, before recovering about $1,000 to trade near $2,800 on Monday, according to CoinDesk.

Bitcoin (2010 -2017)

Source: CoinDesk

Back on July 5, Moas told CNBC he bought some bitcoin, ethereum and litecoin and expects bitcoin could reach $5,000 "in a few months." He subsequently published an article on Reddit outlining his views on digital currencies.

Since then, institutional attention on bitcoin has only increased.

Fundstrat co-founder Tom Lee became the first major Wall Street strategist to publish a report about bitcoin on July 7. Less than a week later, Switzerland's financial market regulator authorized the first Swiss bank to manage bitcoinfor clients, while the U.S. Commodity Futures Trading Commission last Monday approved the first bitcoin options platform.

Last Tuesday, the U.S. Securities and Exchange Commission also issued a report and investors bulletin on initial coin offerings, or sales of new digital coins.

"I have little doubt that 1% of the money in cash, bonds, stocks and gold will end up in cryptocurrencies," Moas wrote in his report.

Since the $80 billion cryptocurrency market right now is a 25th of 1 percent of the $200 trillion in gold, cash, stocks and bonds, Moas pointed out digital currencies will need to increase by 25 times in order to reach 1 percent of the overall capital market.

If cryptocurrencies become part of asset allocation models and take 2 to 4 percent of capital markets, then the digital currencies will likely increase 100 times in value, Moas said

To be sure, Moas also laid out a host of risks for investing in digital currencies, including inherent high volatility, large-scale hacks on cryptocurrency firms and potential regulation, especially in China, that could cause prices to "collapse."

In addition, Moas pointed out the lack of customer support for online digital currency products.

"There is no telephone support," he said in the report. "You must go to the FAQs section and spend a long time looking for the answer to whatever question you may have and then you may not be happy with the answer. Your only other option is to send an email to customer support which could take anywhere from one-to-seven days to get a reply."

Coinbase, a popular website for buying and selling digital currencies in the U.S., has repeatedly reported website loading delays or outages in the last few months due to high customer traffic.

All that said, the stock analyst said he believes the time to buy digital currencies is now. He described in his report how investors can buy bitcoin, and why financial institutions are interested in the blockchain technology behind bitcoin and other digital currencies.

"I watched from the sidelines for a few years and it felt recently as if the train is leaving the station," Moas said. "I think we are still in the first quarter of a four quarter game and that even though I missed out on significant gains (2014 - 2016), it is not too late to get in."

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Bitcoin Chrome Extension Keeps You Up to Date on Price Fluctuations – Lifehacker

Posted: at 5:51 pm

Image credit: Francis Storr/Flickr

Despite its reputation for getting constantly hacked, cryptocurrency like Bitcoin remains a hot commodity. If youve got a Satoshi or two in your wallet, you probably want to stay up to date on its value to make sure you dont lose your shirt if (lets be real, when) it crashes. Thats where Bitcoin Tracker comes in.

Unknown hackers made off with an estimated $32 million in hot cryptocurrency Ether, one of the most

Bitcoin Tracker, a free Chrome extension from developer Rahul Devaskar, lets you check out Bitcoins value every time you open a new web page.

After installing the extension, youll be able to pick your currency of choice and check out the current Bitcoin value. It also shows you its value whenever you open a new tab. There are other Bitcoin price trackers online, but Bitcoin Tracker seems the more polished of the bunch.

Devaskar wrote the extension after growing tired of missing out on buying Bitcoin during its lower price points. I built this tool to make sure that I dont miss on the next bitcoin price surge, Devaskar wrote. It has worked beautifully for me. Smart thinking. Buying Bitcoin when the price drops has proven a pretty effective way to make a quick buck in the short term, and sites like WhatIfBitcoin can show you how much money you would have made had you gotten in early.

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Bitcoin UASF Proposal Quietly Activates to Little Effect – CoinDesk

Posted: at 5:51 pm

A controversial scaling proposal activated on bitcoin last night, though it happened quietly.

Bitcoin Improvement Proposal (BIP) 148, the much-discussed user-activated soft fork (UASF)activated at block 478,484 on the bitcoin blockchain, though its code changes were supercededby another proposal designed to disable it.

Sometimes branded as a protest effort, BIP 148 allowed bitcoin's node operators a way to show their displeasure with miners, who theybelieved were blocking popular code updates, who they argued should not have a say in such matters.

As such, BIP 148 emerged as perhaps the most controversialway for the network to enact Segregated Witness, one that while influential, never achieved widespread endorsement.

If things had gone differently, users, mining pools, and companies running the BIP 148 nodes would have started rejecting blocks that did not signal support for SegWit yesterday.There's a chance this would have caused bitcoin to split into two competing assets.

By now, however, fears of a sudden split by way of BIP 148 have been avoided. Thanks partly to a proposal known as BIP 91, bitcoin mining pools were able to rally together before August 1 by locking in SegWit for activation. UASF supporters often argue that mining pools were incentivized to signal for SegWit because they wanted to avoid the activation of BIP 148for more political reasons.

In this way, BIP 148's activation importance is arguably more symbolic, marking the avoidance of a split.On the other hand, a miner-activated hard fork (MAHF) that will fork bitcoin is scheduled for later today.

Match imagevia Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at [emailprotected].

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New Bitcoin regulations shake up Washington state’s cryptocurrency industry – GeekWire

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BigStock Image / Inked Pixels

Bitcoin has been gradually shedding its reputation as a fringe investment, as its value zig-zags into the stratosphere, and it becomes accepted by businesses such as Expedia and Microsoft. But while financiers have been paying more and more attention to cryptocurrencies, so have state governments.

On July 23, Washington became the latest state to regulate the digital currency market, ostensibly to protect consumers. The bill establishing the regulations, passed by the state legislature in April, has prompted both scorn and praise within the cryptocurrency community, and has led some Bitcoin-related businesses to shut down their Washington operations rather than comply.

The bills primary targets are digital exchanges, which allow customers to trade and deposit their Bitcoin, Ethereum, and other currencies. Every exchange with Washington customers must now operate under the states money transmitter laws, which have traditionally applied to businesses like Western Union. That includes an obligation to be licensed by the states Department of Financial Institutions, and to maintain virtual currency reserves equal to the funds they retain on behalf of customers.

In addition, exchanges must agree to third-party security audits of their systems, and post surety bonds of between $10,000 and $550,000, which work as security deposits in the event customers deserve compensation from an exchange.

We had these old regulations for money transmitters in the state, and they were clearly meant for older business models, said Charles Clark, who helped craft the new laws at the Department of Financial Institutions. The virtual currency industry had issue with that. This gives them some clarification and guidance.

Shortly after the regulations were signed into law, exchanges such as Bitfinex, Bitstamp, Kraken, and Poloniex pulled out of the state, and informed Washington customers they needed to take their business elsewhere. In a statement, Kraken said that while revenue continues to grow, operating costs have become prohibitive, primarily due to the high cost of continuing to meet the regulatory compliance requirements imposed by the state. Unfortunately it has become impractical for us to operate in Washington and we must discontinue service for all residents.

Others have taken to Reddit to respond to the regulations, accusing Washington of having a cryptohating legislature and being a very sorry state for any forward-thinking, technology enthusiast individual to reside in.

Clark said hes followed the online conversation and the news of exchange closures. He downplayed the fallout, noting that Washington issued a regulatory guidance paper on virtual currencies in 2014, and that new regulations are similar to those found in states like New York or North Carolina.

This legislation shouldnt have come as a surprise at all, said Clark.

Washingtons new policies were formed through discussions with a range of cryptocurrency industry groups, licensees, trade associations, the Chamber of Digital Commerce, and companies involved in the space, Clark said.

One of the companies participating in these discussions was Coinme, which operates Bitcoin ATMs in Washington, provides wallet services and facilitates the exchange of virtual currencies in 18 states and internationally. Coinme CEO Neil Bergquist praised Washington states approach, calling Washington a leader among the 50 states on regulating virtual currencies, and early on the draw in providing guidance to companies. He predicted the exchanges leaving the state wouldnt make too many waves.

As long as there are still some (exchanges) standing at the end of it, I think it will have a somewhat minimal impact on consumers, said Bergquist, who pointed out that the largest exchange, Coinbase, is still operating in Washington.

The cryptocurrency industry has been a boon to the state economy, Bergquist said, creating high-paying jobs and a number of new millionaires in recent years. But even as it gains in popularity, its still confusing and arcane to many government officials. Lawmakers must recognize the gaps in their knowledge, he said, or risk squashing innovation.

There are some states whose approach is unfortunate, and some are doing a better job because they actually do the work to understand it, Bergquist said. Its important that regulators, entrepreneurs, and customers are all part of that dialogue.

Where some governments have addressed the burgeoning cryptocurrency industry with regulations, others have taken a different approach. This past June, for example, Montana awarded a $416,000 grant to a Bitcoin mining firm, and Nevada passed a law specifically prohibiting Bitcoin transactions from being taxed.

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Science Updates: Bresnik reaches space station, Sally Ride heads out to sea – The San Diego Union-Tribune

Posted: at 5:50 pm

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FLYING HIGH

NASA astronaut Randy Bresnik a Marine pilot who was stationed at Miramar for many years has arrived at the International Space Station. Hes scheduled to spend six months at the orbiting outpost. Bresnik will help with several scientific experiments, including one involving potential therapies for Parkinsons disease.

This is Bresniks second trip into space. He earlier served on a space shuttle mission, and performed two spacewalks .

RIDE, SALLY, RIDE

The research vessel Sally Ride is leaving San Diegos Scripps Institution of Oceanography this week to study the ecosystem of the California Current. The ship will be operating offshore, roughly between San Diego and Point Conception.

This is a return-to-service for the R/V Ride, which spent about three months undergoing repairs and upgrades.

The ship is named after former UC San Diego researcher Sally Ride, the first American woman to travel in space.

MONEY FLOWS TO SDSU

San Diego State University says that it raised more than $134 million in research funding during the fiscal year that ended on June 30. Thats one of the highest figures in campus history, but far from the $250 million it wishes to raise annually to evolve into one of Californias elite science centers.

The new money is being used for everything from heart studies to gauging the impact of smoking and air pollution in low income housing.

Twitter: @grobbins

gary.robbins@sduniontribune.com

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Science Updates: Bresnik reaches space station, Sally Ride heads out to sea - The San Diego Union-Tribune

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