* This newsletter is a curated list of top cryptocurrency and blockchain news as they relate to US National Security Interests. Featured below are short segments of related articles along with links to the original source. I do not take credit for any of the work below, all authors and there sources are cited.
(No Significant News to Report)
- RUSI-ACAMS Cryptocurrency Risk & Compliance Survey (RUSI) *
- Coinbase Offers US Feds New Crypto Surveillance Tools (Coindesk)
Crime and AML
- Spring 2020 Cryptocurrency Anti Money Laundering Report (CipherTrace)
- Updated: Russia Leads Global BTC Trading on LocalBitcoins in 2020 (CoinTelegraph)
- Coronavirus Lockdown Boosts Bitcoin Trading in Russia (CoinTelegraph)
- Russia Sort Of Dropped The Hammer On Bitcoin, Crypto (Forbes)
- China’s Digital Currency Could Challenge Bitcoin and Even the Dollar (Bloomberg)
- Iranian Lawmaker Says Bitcoin Should Be Central Bank’s Turf (Coindesk)
*RUSI announces launch of survey, report not yet released
RUSI-ACAMS Cryptocurrency Risk & Compliance Survey
By: RUSI, June 1st, 2020
RUSI’s Centre for Financial Crime and Security Studies is launching a global survey on cryptocurrency risk and compliance, in partnership with ACAMS, and you can take part now.
If you are interested in participating in the survey and work on cryptocurrency risk and compliance issues, please contact firstname.lastname@example.org and include your affiliation. The deadline for responding is June 30, 2020.
The RUSI-ACAMS Cryptocurrency Risk & Compliance Survey will provide an unprecedented insight into how governments, the crypto industry, traditional financial institutions, and others view and respond to financial crime and other risks as it relates to cryptocurrencies.
The survey is being jointly conducted by The Association of Certified Anti-Money Laundering Specialists (ACAMS) and the Centre for Financial Crime and Security Studies at the Royal United Services Institute (RUSI), in partnership with YouGov, the globally renowned market research company.
Coinbase Offers US Feds New Crypto Surveillance Tools
By: Danny Nelson, Coindesk,Jun 5th 2020
Coinbase is getting in on the government blockchain analytics game.
The behemoth cryptocurrency exchange has initiated procurement deals with the Drug Enforcement Administration (DEA) and the Internal Revenue Service (IRS) for a cryptocurrency investigations tool called “Coinbase Analytics,” according to publicly available documents. The Block first reported on the prospective deals Friday.
Coinbase Analytics has close ties with Coinbase’s entire product ecosystem, as its Senior Product Manager “collaborates” with “Coinbase Consumer, Coinbase Pro, and Coinbase Custody as well as” Coinbase’s payments and crypto division, according to an undated but now closed job posting.
In an emailed statement, Coinbase said its Analytics product does not and has never used any internal customer data.
“Coinbase Analytics data is fully sourced from online, publicly-available data, and does not include any personally-identifiable information for anyone, regardless of whether or not they use Coinbase,” a spokesperson told CoinDesk.
Coinbase joins a crowded field of cryptocurrency analytics companies – Chainalysis, Elliptic, CipherTrace and others – vying for a piece of the federal pie. Agencies from all corners of the U.S government regularly contract with crypto intel firms, inking deals for their tracing software worth millions, and sometimes stretching years.
Read more: Inside Chainalysis’ Multimillion-Dollar Relationship With the US Government
Apparently, Coinbase, who bought blockchain intelligence firm Neutrino in February 2019, is about to undercut the competition.
“This is the least expensive tool on the market and has the most features for the money,” read a DEA May notice so heavily redacted that those features’ specifics are unclear. But they are unique, as the IRS notice, published in April, notes Coinbase Analytics has “enhanced law enforcement sensitive capabilities that are not currently found in other tools on the market.”
Coinbase confirmed that it developed the Analytics product from Neutrino. It further stated that Analytics is available for financial institutions and law enforcement agencies alike, and is used in internal investigations.
“It’s an important tool to meet our regulatory requirements and protect our customers’ funds,” Coinbase said.
The DEA’s interest appears to stem in part from Coinbase Analytics’ pinpoint accuracy. It has “some of the most conservative heuristics used in commercial blockchain tracing tools,” a “critical” distinction in avoiding false positives, the DEA notice read.
Neither the DEA or IRS disclosed the bottom-line value of their prospective deals, which federal contract websites indicate have not been finalized yet. Both agencies seek year-long contacts with Coinbase, and the DEA deal is not more than $250,000.
The IRS has recently begun ramping up its activities in the cryptocurrency space, sending tax firms notices last month requesting proposals for auditing support.
Crime and AML
Spring 2020 Cryptocurrency Anti Money Laundering Report
By: CipherTrace, CipherTrace, June 2nd 2020
In the first five months of 2020, crypto thefts, hacks, and frauds totaled $1.36 billion, suggesting 2020 could see the second-highest value in crypto crimes ever recorded. In a trend that continues from last year, fraud and misappropriation still make up most of the year’s stolen crypto compared to hacks and thefts. Of the $1.36 billion stolen, fraud and misappropriation account for 98% of the total value—nearly $1.3 billion.
On the regulatory front, CipherTrace data reveals 74% of the bitcoin moved in exchange-to-exchange transactions was cross-border. The abundance of cross-border transactions highlights the need for exchanges to adopt appropriate cross-border controls to ensure AML and CTF compliance. The need for compliance is especially profound in light of impending Travel Rule enforcement and the recent statement by FinCEN Director Kenneth Blanco reminding the crypto community that Travel Rule compliance is already the expectation in the United States.
Updated: Russia Leads Global BTC Trading on LocalBitcoins in 2020
By: Helen Partz, CoinTelegraph, Jun 2nd, 2020
Russia trades nearly twice as much BTC on LocalBitcoins as Venezuela and the U.S.
According to the data, Russia was responsible for 19% of total BTC trading volumes on LocalBitcoins this May, leaving Venezuela and the United States trailing. LocalBitcoins’ BTC trading in Venezuela and the U.S. reportedly accounted for 11% and 10%, respectively. Total Bitcoin trading volumes on LocalBitcoins in May 2020 amounted to 17,867 bitcoins, the firm found.
The information provided by CryptoDiffer apparently coincides with data from major Bitcoin statistics website, Coin Dance. According to Coin Dance’s website, Russia’s weekly BTC trading volumes on LocalBitcoins accounted for about 800 BTC in May 2020. Meanwhile, Venezuela and the U.S. were trading around 400 BTC per week during the same month.
Coronavirus Lockdown Boosts Bitcoin Trading in Russia
By: Felipe Erazo, Cointelegraph, Jun 4th, 2020
On June 4, a new study performed by a number of Russia-based crypto exchanges revealed a significant rise in Bitcoin (BTC) trading across Russia since March amid the COVID-19 lockdown.
As RBC reports, representatives from the Russian offices of exchanges like Binance, Garantex, and EXMO, highlighted the growth in the number of users in Russia. This number is relative to the increase in trading volumes from March until June.
Boost in registrations from Russia users
Gleb Kostarev, head of the representative office of Binance in Russia, explained that the number of registrations on their platform during April 2020 was two times higher than in December of 2019.
Russia Sort Of Dropped The Hammer On Bitcoin, Crypto
By: Kenneth Rapoza, Forbes, Jun 1st 2020
Russia’s State Duma hates bitcoin, ether, ripple, you name it. If it is not the ruble, or a currency issued by a state, Russia’s government is not into it.
The government posted an updated version of their new draft law “On Digital Financial Assets” on Monday for public comment, along with it additional documents that significantly change the way cryptocurrency is regulated in Russia. Breaking the rules comes with legal penalties now. But the good news is, Russians don’t have to give up their fixation on cryptocurrencies.
The law, which is not a major shift in tune from The Kremlin or the Central Bank in regards to official positions on privately issued crypto currencies, does however prohibit the circulation of all cryptocurrencies, as well as their mining and advertising.
“Сryptocurrencies go completely into the gray zone in Russia,” says Artem Kalikhov, chief product officer of Waves Enterprise. “People who own one or two bitcoins are not at risk. But all cryptocurrency exchanges and wallets hosted on Russian sites with a .ru at the end are now at risk.”
China’s Digital Currency Could Challenge Bitcoin and Even the Dollar
By: Chris Anstey, Lulu Chen, Heng Xie, Bloomberg, June 1st, 2020
People in China are no strangers to digital payments—if anything, it’s easier to move around and shop in Shanghai or Beijing with an Alipay or WeChat Pay smartphone app than it is bearing a pocketbook filled with yuan notes. Now the Chinese government has begun a pilot program for an official digital version of its currency—with the likelihood of a bigger test at the Beijing Winter Olympics in 2022. Some observers think the virtual yuan could bolster the government’s power over the country’s financial system and one day maybe even shift the global balance of economic influence.
Most money that gets swapped around electronically is just credits and debits in accounts at different banks. China’s digital cash is designed to be an electronic version of a banknote, or a coin: it just lives in a digital wallet on a smartphone, rather than a physical wallet. Its value would be backed by the state. But virtual cash would be quicker and easier to use than the paper kind—and would also offer China’s authorities a degree of control never possible with physical money.
Iranian Lawmaker Says Bitcoin Should Be Central Bank’s Turf
By: Danny Nelson, Coindesk, Jun 2, 2020
An Iranian lawmaker wants his country’s central bank to take bitcoin seriously.
Representative Mohammad Hossein Farhangi (Tabriz), speaking Tuesday before the nation’s parliament, called on the Governor of the Central Bank of Iran, Abdolnaser Hemmati, to handle oversight of bitcoin, according to the Tasnim news agency.
Calling proper management of bitcoin a “good opportunity for the country,” Farhangi warned against ceding its potential to financial institutions. “Take the issue of bitcoin seriously,” he said.
Iran has been taking crypto seriously on some fronts. Parliament moved to enact restrictive currency smuggling laws in late May. Around that time, President Hassan Rouhani ordered his government to begin devising a national crypto mining strategy and accompanying regulatory regime. The Ministry of Industry, Mine and Trade also licensed Iran’s largest bitcoin mining operation in May.
But Farhangi, who sits on the Industries and Mines committee, thinks that Iran’s mining hyperfocus leaves much to be desired in its treatment of cryptocurrencies.
“We do not understand that the government has entrusted the monitoring of bitcoins to the Ministry of Industry and Mines,” he said, “because the central bank must oversee digital currencies.”
Iran has been tiptoeing towards broader cryptocurrency adoption despite signals that the Central Bank might try to ban payment via bitcoin. Some in the financially ostracized country also reportedly see cryptocurrency as a means to evade sanctions.