Canadian Authorities Seek Help Identifying Bitcoin ATM Double-Spenders

Around two weeks later, Coinbase added support for Bitcoin Cash (BCH). And starting on February 22nd, it introduced support for storing, sending, …

Authorities in Canada are reportedly looking for help identifying four suspects of conducting double-spend attacks on Bitcoin ATMs throughout the country, potentially taking advantage of these accepting 0-confirmation transactions.

According to the CBC, the four suspects managed to make over CAD $200,000 ($150,000) through the attacks, in which they managed to conduct 112 fraudulent transactions in seven cities in Canada, half of which in Calgary.

The attacks were carried out for 10 days in September of last year. Besides Calgary, the suspects also conducted double-spend attacks on Bitcoin ATMs in cities like Toronto, Montreal, Winnipeg, Ottawa, and more.

Authorities believe the individuals have n-depth knowledge or interest in cryptocurrency, bitcoin and/or blockchain technology.” They seemingly managed to steal the funds by taking advantage of the Bitcoin ATMs accepting 0-confirmation transactions.

CCN points out that replace-by-fee tools developed by Canadian Bitcoin Core developer Peter Todd could have been used in the attack. The tools themselves weren’t created for such activities, but allow for “stuck” transaction to go through using additional fees.

There is, however, a “double-spend” tool. That creates two transactions in succession, one paying a specific amount to a specific address, and a second one double-spending that transaction.

Per Todd, it also allows users to “optionally specify that the first transaction additional OP-RETURN, multisig, and “blacklisted” address outputs.” He added:

Some miners won’t accept transactions with these output types; those miners will accept the second double-spend transaction, helping you achieve a successful double-spend.

Looking for the suspects, Calgary Police are being aided by other law enforcement agencies, including the Toronto Police, the Winnipeg Police Service, and more. Those with information on the case can submit anonymous tips.

The development comes after criminals snatched a cryptocurrency ATM in a California bakery break-in. According to CoinATMRadar, there are over 4,400 Bitcoin ATMs in the world, and reports seem to suggest criminals are increasingly targeting them.

0-confirmation transactions are somewhat controversial, as while some point out they aren’t as secure as transactions that wait for more confirmations on the BTC blockchain, others claim they are a necessity to not have customers who want to spend funds wait for these confirmations.

As CryptoGlobe covered, however, waiting for confirmations may not be the only problem bitcoiners may have while paying for everyday goods using BTC, as even paying for coffee with the cryptocurrency could lead to tax headaches.

Featured image of the suspects from the Calgary Police Service.

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SEC Chairman Clayton: Agrees Ethereum is No Longer a Security

Clayton also praised the Commission’s transparency in dealing with matters relating to the regulatory status of cryptocurrencies in the United States.

Jay Clayton, the Chairman of the United States Securities and Exchange Commission has confirmed statements made by SEC analysts in 2018 that not all cryptocurrencies are securities. The head of the regulatory agency also highlighted the need for a more nuanced discussion about what constitutes a security in the eyes of the SEC as far as the emerging cryptocurrency landscape. Clayton also praised the Commission’s transparency in dealing with matters relating to the regulatory status of cryptocurrencies in the United States.

The SEC

Not All Cryptocurrencies are Securities

In a letter dated March 7, 2019, Clayton responded to inquiries earlier made by Rep. Ted Budd, R-N.C., concerning comments made by William Hinman, the head of Corporate Finance at the SEC, in mid-2018. Back in June 2018, Hinman while delivering a speech, declared that Ethereum was not a security.

According to Clayton, the Commission does not consider Ethereum, the second-largest cryptocurrency in the market to be a security. This is despite the fact that Ethereum did carry out an Initial Coin Offering (ICO) back in 2014.

For Clayton, the question of whether a cryptocurrency fits the bill of a security depends mainly on the provisions already set forth by federal securities laws, as well as, the Howey test. An excerpt from the letter elaborating on the matter reads:

“The ‘touchstone’ of an investment contract ‘is the presence of an investment in a common venture premised on a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.’ The determination of whether a digital asset is an ‘investment contract’ depends on the application of Howey and its progeny to the particular facts and circumstances of the digital asset transaction.”

Concerning Hinman’s statements, Clayton expressed his agreement with the former’s analysis. The classification of Ethereum as not being a security was a highlight of the speech. With this letter, it appears the Commission agrees with Hinman that Ethereum is indeed not a security. Also, in June 2018, Clayton identified Bitcoin and similar cryptocurrencies which are substitutes for fiat currency as not being securities.

A Nuanced Approach to the Utility vs. Security Debate

While stating that there is an already laid down set of guidelines for determining the regulatory status of a cryptocurrency, Clayton did admit that given the unique nature of virtual assets, the question of whether a token is a security or not might require a more nuanced approach.

According to Clayton, the SEC continues to employ a transparent process of engaging with stakeholders in the industry concerning the regulatory status of cryptocurrencies. In the letter, the SEC chief declared that the Commission has established numerous initiatives aimed at assisting industry players to become more compliant with regulatory provisions.

However, there are many commentators who believe that the SEC’s stance on ICO tokens being securities will negatively impact the growth of the industry in the United States. A group of Congressmen at the back end of 2018 began preliminary parliamentary procedures to create legislation that would exempt cryptocurrencies from securities law.

In 2019, states like Colorado and Rhode Island are in the process of passing laws that would exempt ICOs from being subject to state securities regulations. The lack of consensus among regulators in the United States over whether cryptocurrencies are utilities or securities has led to a patchwork of different regulations in many states.

Meanwhile, the SEC chief insists that the Commission will continue to remain vigilant, stamping out instances of fraud and other violations of federal securities law. Since 2017, the SEC has clamped down hard on ICOs in the United States with numerous arrests and project shutdowns recorded in the process.



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Mexico’s Central Bank Publishes ‘Catch-22’ Rules Impacting Crypto Exchanges

This law stipulates that services that hold custody of users’ fiat money or cryptocurrencies (most brokers and exchange business models require this) …

The central bank of Mexico has published rules on crypto assets that put crypto exchanges in “a catch-22 type of situation,” the CEO of a local exchange explained to news.Bitcoin.com. They “essentially stipulated that they wouldn’t authorize any cryptocurrency to be offered by regulated financial companies.”

Also read: SEC Chair Explains Key Upgrades Needed for Bitcoin ETF Approval

Regulating Mexico’s Crypto Industry

The Bank of Mexico (Banxico), the country’s central bank, published a circular in the Official Gazette of the Federation on Friday detailing crypto-related provisions for the regulation of financial technology institutions (ITFs).

Mexico's Central Bank Publishes 'Catch-22' Rules Impacting Cryptocurrency Exchanges

Tomas Alvarez, CEO of Mexican crypto exchange Volabit, explained to news.Bitcoin.com on Tuesday that “A year ago a law to regulate fintech companies was passed by the Mexican Congress. This law stipulates that services that hold custody of users’ fiat money or cryptocurrencies (most brokers and exchange business models require this) have to apply for a license issued by the Mexican equivalent of the SEC (CNBV).”

He elaborated that the same fintech law “tasked the central bank of México (Banco de México) with the responsibility of determining which cryptocurrencies were authorized to be offered to the public by these regulated companies, and gave the Bank of México 12 months to come up with a secondary law to establish some kind of framework or list of authorized cryptocurrencies.” The CEO added:

The deadline was due to expire this month so last Friday Bank of Mexico published their secondary laws which essentially stipulated that they wouldn’t authorize any cryptocurrency to be offered by regulated financial companies.

Mexico's Central Bank Publishes 'Catch-22' Rules Impacting Cryptocurrency Exchanges

‘Catch-22’ Situation

The Bank of Mexico circular issued on Friday states that “Institutions may only enter into transactions with virtual assets that correspond to internal transactions, subject to the prior authorization granted by the Bank of Mexico.” In addition, the provisions specify that “They will not be eligible for obtaining the authorization” to directly provide their clients with cryptocurrency exchange, transmission or custody services.

Alvarez commented:

This is a catch-22 type of situation because, as a Mexican exchange, the law requires you to become a regulated financial institution (otherwise you would be operating illegally). However, once you obtain this license you would not have the authorization to list any cryptocurrencies, making it legally impossible to operate an exchange in Mexico with the fintech law in place.

Mexico’s Central Bank Publishes ‘Catch-22’ Rules Impacting Cryptocurrency Exchanges

Law in Effect

The provisions in the circular are subject to public consultation until June 5. However, Alvarez noted that “Officially the law is in effect since the moment it was published (last Friday) however it only applies to regulated fintech companies of which none exist yet because the process for becoming a regulated fintech company has not been determined yet by CNBV (Mexico’s SEC).”

He clarified, “Fintech companies in Mexico are operating with a special waiver until the process for registration is ready thus allowing companies to register for the license. This will happen in around 6 months,” asserting:

It is important to note that the comments submitted during the consultation are non-binding and the general sentiment is that Bank of Mexico will ignore them.

What do you think of the rules set by the Bank of Mexico? Let us know in the comments section below.


Images courtesy of Shutterstock.


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Kevin Helms

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.

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EY Exec: Blockchain “Most Boring Revolution Ever,” Public Cryptocurrencies Like Bitcoin Have …

Brody believes that public cryptocurrencies, for the most, will not appeal to most businesses because they simply add “foreign exchange risk”:.

EY’s Global Innovation Leader says the deployment of distributed ledger tech will be important but relatively slow and unremarkable, Forbes India reports.

As well, Paul R Brody says he does not see much practical use for public cryptocurrencies (“Bitcoin or nearly any other cryptocurrency”) in India, simply because most business is conducted in local currency and cryptocurrencies must generally be converted back to fiat.

The imminent “blockchain revolution” promoted by marketers of ICOs has yet to materialize because “…people have unrealistic expectations about how quickly a technology like blockchain will be adopted,” said Brody:

“Unlike consumer internet applications, enterprise systems are adopted very slowly. Consumers don’t usually spend much time thinking about system integration or security issues and they’re individually empowered to sign up for new services.”

“Enterprises, by contrast, are driven by complex systems integration. Adoption depends on re-thinking processes and integrating systems, and getting comfortable with security considerations. What takes an individual just a couple minutes to adopt a system like Uber or Ola, takes a company months.”

Brody says EY has had positive results in its lab working with private “blockchains,” although some would probably liken what EY is testing to more of a distributed ledger rather than a classic and genuine blockchain.

According to Brody, EY’s private version of “blockchain” allows, “…transactions (that) cost pennies and can be completed in seconds or less. We tested private blockchain systems at our labs at up to 20 million transactions a day, and in some cases, we think we can easily get to 100 million per day in the near future. ”

But Brody refrains from heady panacea claims often encountered in seas of crypto/blockchain market-spiel, and even admits crypto platforms cannot outperform traditional payment rails:

“One must carefully choose the kinds of business applications to run on blockchain. Even though blockchains are getting faster, they are never going to be cheaper or faster than existing banking payment systems or stock exchange platforms.”

Brody says, “Blockchains excel at handling complex rules that require sharing information across many parties, such as insurance policies or volume purchases and shipping agreements. Traditional banking systems are great at speed, but they do not allow for the parties to include shared business rules in these agreements, for example. The work EY is doing with Microsoft is an excellent example: We are jointly deploying a blockchain solution for digital business contracts, with a focus on software and IP licensing.”

He also believes “blockchains” could be effectively used to counteract counterfeiting and fraud in supply chains:

“Using blockchain technology, we can write smart contracts that make sure companies automatically comply with regulations and pay taxes, all while keeping track of product origin and history with a complete audit trail.”

While blockchains or shared ledger software with cryptographic access may indeed streamline and align aspects of supply chains, critics have also argued that these systems are not “immutable” like public blockchains.

This means that anyone with access to cryptographic keys may be considered a corruptible “point of failure” along the supply chain.

Whether wizardly tech is in place or not, a warehouse foreperson with encrypted key access to a supply chain database, for example, could be bribed to introduce counterfeit goods into the chain.

Still, cryptography may help tighten a supply chain’s access points.

Brody thinks the tech could help medium and smaller businesses enhance supply chain integrity by making the tech cheaper to access:

“In the past, this kind of technology has been too costly for small and medium businesses. With blockchain, I believe it will be possible for medium-sized companies to build sophisticated digital connections with partners and get product-to-market faster, and at a more competitive cost.”

However, he sees no particular use for cryptocurrencies in everyday life:

“I see Bitcoin as just another ‘foreign’ currency—only one without a country. That being said, I see no practical use for Bitcoin or nearly any other cryptocurrency.”

Brody believes that public cryptocurrencies, for the most, will not appeal to most businesses because they simply add “foreign exchange risk”:

“Most people and companies earn their revenue and spend their money in local currency; we believe the future of business transactions on the blockchain are tokenised fiat currencies—basically blockchain-linked dollars, euros, yen, rupees and so on. Transacting on a day-to-day business in a foreign currency just adds foreign exchange risk to all your transactions.”

He also took issue with claims that Bitcoin’s deflationary model is a sound basis for economies:

“Most economists agree that deflation is, in fact, extremely bad for economies. Inflation, particularly out of control hyper-inflation, has not been a real risk in mature economies for decades, so widespread adoption of Bitcoin could be very damaging to the global economy.”

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