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Bitcoin & Co.: Switzerland ends anonymous financial transfers

The Swiss financial regulator will in future ban anonymous transactions of bitcoins and other virtual currencies. It is causing a negative excitement in the crypto industry.

According to their name and their intention, virtual currencies like Bitcoin should be "cryptic" - that is, secret, of unclear origin. Therefore, they are also a popular means of money laundering and covert financing. The Swiss financial regulator (Finma) now wants to put an end to this in its area of responsibility and requires an "address slip" for every transaction. This is making big waves in the crypto industry.

Although the announcement already took place on August 26, 2019, it is only now really being noticed by the players in this sector and is provoking some violent reactions. Critics fear a paradigm shift, speak of the "end of crypto payments", a "technology-discriminating practice" and a location disadvantage for the Swiss banking center.

In fact, the federal supervisory authority now applies the same "Travel Rule" to transactions with cryptocurrencies that already applies to banks' normal payment transactions and that makes binding information on the sender and beneficiary for each order. This is intended to enable verification and comparison with sanction lists. The introduction of this so-called "Travel Rule" is not an invention of Finma, but essentially implements the guidelines agreed in June 2019 by the OECD working group "Financial Action Task Force on Money Laundering". The aim of the agreement is to better combat money laundering and terrorist financing.

So there are also more sober voices: According to the head of the blockchain department of management consultancy PwC, Daniel Diemers, this step corresponds to "the general weather situation". The discussions of the International Monetary Fund, the Bank for International Settlements, the ECB and the European Financial Market Authority went in the same direction. After all, traditional banks are also not allowed to process anonymous payments. However, it is still unclear how the new regulation can best be implemented technically for Switzerland. The travel data could be given in the blockchain or noted centrally and then linked to the chain.

In terms of secrecy, token suisse founder and CHIEF executive Alain Kurz pours plenty of water into the wine, because "although many investors believe that bitcoin can be paid anonymously, the opposite is true". This guarantee would only be provided by private coins such as the Monero. With this digital money, most payments would now be processed on the infamous darknet.

Which technical solutions the financial service providers offer to implement the new Finma regulation is still unclear. Bitcoin Suisse has set up an open discussion platform at What is certain is that the costs will increase - however, according to Daniel Diemers, crypto transactions should remain cheaper in the future than traditional payments.

Swiss Federal Council wants to further improve conditions for DLT / Blockchain

The Federal Council regards the legal framework in Switzerland as intact for Blockchain / DLT. Therefore, there is no own law, but only adjustments to the existing

At the meeting on November 27, the Federal Council published its new template for the framework conditions for Blockchain / DLT. In terms of content, it continues where he ended up on the topic in the last round: The further improvement of the framework conditions for Blockchain / DLT.

The template roughly follows three goals:

  • Increasing legal certainty
  • Elimination of hurdles for applications of technology
  • Limitation of abuse risks

Already at the end of last year, the Swiss Federal Council expressed itself positively and in a forward-looking manner. The framework conditions, which at that time were already classified as "good", need to be further improved. He emphasized that he wanted to create the best possible framework conditions so that Switzerland could establish and develop further as a leading, innovative and sustainable location for Fintech and DLT companies. New is the issue of abuse control. Because with increasing attractiveness of the market also increases the abuse and illegal activities.

Another point to which the Federal Council explicitly refers: Ensuring the integrity as well as the good reputation of Switzerland as a financial and business center. Here the global discussions around the planned digital currency Libra of Facebook seem. Switzerland has become more prominent here than the Swiss government have been enjoying it.

The report shows that the legal framework in Switzerland is already well suited today to deal with new technologies including DLT. Therefore, the Federal Council refrains from creating its own specific technology law. Even though there is a need for specific action. The submission received around 80 comments. In principle, the participants welcomed the proposals of the Federal Council.

The Federal Council has now adopted the Federal Law on Adaptation of Federal Law to Developments in Distributed Electronic Register Technology. Due to suggestions from the consultation, the submission has been revised and further developed in various points. The federal law, which was designed as a mantle decree, proposes punctual adjustments in nine federal laws, both in civil law and in financial market law. Parliament is expected to address the bill for the first time in early 2020.

The Federal Council currently sees no need to fundamentally adapt the legal framework or to introduce a comprehensive, specific law because of a specific technology that is still undergoing rapid development. The Swiss legal framework already offers a lot of flexibility and possibilities today. However, there are individual areas of law in which targeted adjustments are imposed to increase legal certainty, remove hurdles for DLT or blockchain-based applications, and limit new risks.

On behalf of the Swiss Federal Council
The Federal President: Ueli Maurer and The Federal Chancellor: Walter Thurnherr



Massive suspicion of manipulation against Bitcoin course 2017

New storm clouds are brewing over the global digital currency Bitcoin. A study by US financial economics professors John Griffin (University of Texas) and Amin Shams (Ohio University) is now fueling the suspicion of a massive manipulation of the Bitcoin course in 2017, where the value of a Bitcoin has risen to nearly $ 20,000.

Financial professors John Griffin and Amin Shams, lecturers at the University of Texas and Ohio State University respectively, analyzed over 200 gigabytes of data about the transaction history between Bitcoin and Tether, another digital currency. Tether is an asset known as "stablecoin" whose trading value is (partially) linked to the US dollar. The study of the professors revealed that the tethers traded against bitcoins had a mysterious pattern.

"We find that the identified patterns are not present in other streams - and almost all of the price impact can be attributed to a major player", wrote Griffin and Shams. "We map this data across both blockchains and find that a large player is behind most of the patterns we document". The manipulation occurred when Bitcoin rose to an all-time high of nearly $ 20,000 in late 2017, according to the study. Griffin and Shams were able to trace the data clusters back to a source. According to the two professors, it is "a big account at Bitfinex", one of the world's leading digital currency exchanges. The Wall Street Journal first reported the results of the updated study in early November.

The study is another setback for the crypto market. Just recently, a report from investment firm Bitwise revealed that 95 percent of all trading volumes in Bitcoin exchanges are fictitious.

"Big Player" should have dominated price history with transactions

The two financial analysts had analyzed more than 200 gigabytes of transactional data, focusing on the two digital currencies Bitcoin and Tether and the trading history between them.

The trading pattern suggests, according to Griffin and Shams, that the course of the Bitcoin in 2017 in correspondence with Tehter could be assigned to a single "big player". The starting point could be a large account at Bitfinex, one of the leading digital currency exchanges, for alleged price manipulation.

As if that were not enough, other studies also tinker with digital money transactions. A recent study by the investment house Bitwise suggests that 95 percent of trading volumes on Bitcoin exchanges are not genuine.

The study comes after an analysis published in March found that 95% bitcoin spot trading is faked. The survey, created by cryptocurrency asset manager Bitwise for the SEC, found that only $273 million of about $6 billion in average daily bitcoin volume was legitimate.



Tether: The Controversial Bitcoin Pump

Bitcoin dominates the market. BTC's market capitalization now accounts for almost 70% of the total exchange-traded cryptocurrency. But when trading cryptos on exchanges, there is an exception: some days, more Tethers (USDT) are traded than Bitcoins. Especially if the prices of Bitcoin and others grow strongly or fall sharply, then traders resort to Tether.

What is Tether?

Tether was originally born in 2014 under the name "Realcoin" by a startup of founders Brock Pierce, Reeve Collins and Craig Sellars in Santa Monica. Soon, "Realcoin" was renamed to Tether and got the abbreviation USDT, under which Tether is traded on crypto exchanges. The basic idea is that Tether should be a stablecoin that is not subject to the volatility of other cryptocurrencies and is pegged to the US dollar.

What is Tether used for?

Answered by Alexander Valtingojer from Coinpanion:

Tether allows the quick exchange of a crypto-asset (eg Bitcoin, Ether etc.) into a traditional asset (i.e. US-Dollar, Euro etc.), without having to leave the crypto-exchange. A stablecoin is a crypto-derivative: the representation of an underlying in the form of a token.

Tether is used primarily in the trading space to capture price gains from volatile cryptocurrencies in less volatile assets

The intense use of USDT can be seen whenever Bitcoin's prices suddenly start to rise or fall rapidly. As prices rise, investors USDT in BTC, ETH or other crypto assets to quickly participate in the price gains. when prices fall again, they switch back to USDT.

How does Tether work technically?

According to the company behind Tether, USDT tokens are used on the Bitcoin blockchain via the Omni Layer Protocol, on the Ethereum Blockchain as the ERC20 token, and on the TRON Blockchain as the TRC20 token.

Tether tokens can not get mined, but are issued by the company behind them using their own Smart Contract" says Valtingojer. "Originally, Tether tokens were operated via the Omni Layer Protocol. Now these are being generated by the Ethereum and more recently the TRON blockchain.

Who is behind Tether?

The corporate networks behind the Stablecoin are very controversial. The issuing company of Tether is Tether Limited, itself a wholly owned subsidiary of Tether Holdings Limited, which is based in Hong Kong. The CEO is Jan Ludovicus van der Velde.

But there are also links with the company iFinex, which in turn operates the crypto exchange Bitfinex. This was the first to trade in Tethers. Jan Ludovicus van der Velde is also the CEO of Bitfinex. Tether also borrowed money from Bitfinex. The New York Prosecutor General's Office opened an investigation against the companies in April 2019.

Statement from attorney General Letitia James:

Our investigation has revealed that the Bitfinex trading platform operators, who also control the Tether virtual currency, have engaged in a cover-up to obfuscate the $ 850 million apparent loss.

Who holds Tether?

Around 80 percent of all Tether tokens are in possession of about 300 addresses. This has resulted in an analysis by Coin Metrics.

Valtingojer of Coinpanion:

However, this is not uncommon since Tethers are mainly used on centralized crypto exchanges, e.g. Binance is used. There, as a user, you do not have your own wallet and the ownership of the tokens is managed off-chain from the crypto exchanges.

The centralization of Tether is still seen as critical because of the danger that, with the help of USDT, the prices of cryptocurrencies could be controlled under the control of a few investors. For example, a study by scientists at the University of Texas at Austin concluded that Bitcoin's flight from the end of 2017 was the result of a market manipulation that leveraged Tether to artificially pump up the market.

Is Tether really baked by dollars?

There are currently about $ 4 billion tokens in circulation, which can be bought at Tether or Exchanges for $ 1 each. That would mean that the companies behind it stored somewhere around $ 4 billion to cover the value of the virtual tokens. But that is not the case.

Every Tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities.

In April 2019, for example, the companies behind Tether indicated that the coin was only 74 percent covered by dollars in the reserve.

Is Tether really a stablecoin?

Answer from crypto expert Valtingojer:

The name stablecoin results above all from the possibility of exchanging the tokens equivalently for US dollars at any time. Due to short-term increased trading activity and resulting increased trading volumes, there may be divergences between supply and demand, which is why then tokens are exchanged for more or less than one US dollar. In the end, the Tether market is also part of a stock exchange, which is why the price is determined by supply and demand. For example, negative news can lead to increased sales and thus lower the price.