Ethereum Breaks $500 For First Time In Cross-Crypto Frenzy

Ethereum is now worth more in USD than ever before as enthusiasm spreads beyond Bitcoin.

Ethereum has reached $500 for the first time on the strength of future plans and Indian markets opening up trading. Data from cross-exchange resource Coinmarketcap shows ETH currently trading around $525 at press time, topping new highs of $400 seen just six days ago.

The moves echo those of Bitcoin, which has added proportionately similar gains in a similar timeframe, and increased by $1000 in the past 24 hours alone. Co-founder Vitalik Buterin had unveiled the ecosystem’s roadmap at a Taiwan conference last week, eyeing Casper and other technical advances intended to address some of Ethereum’s current issues.

In addition, major Indian exchange app Zebpay added Ethereum trading as a direct response to user demand. In a blog post Monday, it revealed it would also add Litecoin, Ripple and Bitcoin Cash to its books.

Having begun the year at just $8, Ethereum is one of the miracles of 2017’s cryptocurrency explosion. Ethereum Classic, Litecoin, Monero and Dash also posted new all-time highs in USD today.

Source: Coin Telegraph




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ICOs Flow Continues As Regulations Fall Around the World: Expert Blog

International tax officer sums up current state of ICO regulation in US

Expert Blog is Cointelegraph’s new series of articles by crypto industry leaders. It covers everything from Blockchain technology and cryptocurrencies to ICO regulation and investment analysis. If you want to become our guest author and get published on Cointelegraph, please send us an email at mike@cointelegraph.com.

Initial Coin Offering (ICO) is a new way of fundraising enabled by digital currencies and Blockchain technology where participants invest fiat currencies and receive ‘‘tokens,’’ digital assets in return.

ICOs are widely seen as an innovative fintech alternative to traditional initial public offering of stock (IPO) as a means for start-up businesses to raise capital. A person, project or company in need of capital creates a new kind of digital coin and sells a tranche of them for fiat currencies on a digital trading platform or exchange.

Prior to an ICO, a business would typically release a “whitepaper” which provides investors with an explanation of their proposed project, the rights behind the virtual tokens they would be issuing, the risks of the investment and details of the ICO itself.

The rights behind the digital tokens can vary considerably, and many tokens are not intended to grant the investor an ownership stake in the business, unlike stock.

Currently, there isn’t a standardized way of preparing a whitepaper in comparison to regulated prospectuses for IPOs.

ICO’s token valuation

With the exception of hedge fund managers who indiscriminately assess ICO tokens for their long and short selling prospects, the underlying motivation of an ICO investor is the expectation that the token’s value would uptick after the ICO, and the investor would sell it to make a tidy profit.

A token’s value is determined based on (1) the demand for the token which may be denominated in a highly volatile virtual currency (2) the underlying company’s financial performance. Currently, there isn’t a standardized way of determining a token’s value. ICO investors trade these tokens at a profit or loss.

ICO’s technology

The Ethereum (ETH) ICO platform is public and open-source and features smart contract functionality. It is still in its early stages of development, and its application is of experimental nature.

Vitalik Buterin, co-founder of ETH, cautioned that there are flaws, technical intricacies of ETH Blockchain networks that support ICOs arising from the centralization problem, which could take up to two to five years to solve. Buterin expects 90 percent of ETH-based ICOs to fail.

Despite information technology (IT) network security measures, software applications, computer hardware, the Internet, Blockchain platforms supporting the ICOs, are also vulnerable to computer viruses, physical or electronic break-ins, attacks or other disruptions of a similar nature (Hacks).

The revelation of the technical vulnerabilities of the ETH-based platform and the risk of Hacks could add operational, technological risks for ICOs.

ICO’s Fraud

This year has been the year of ICOs for countries like Russia, China and Japan. To date ICOs raised $3 bln, averaging 20 new virtual coin offerings a month, that produced an average investment return of 1,320 percent, 293 times S&P 500 return of 4.5 percent during the third quarter of 2017.

There have been many new uses for ICOs, including municipality-funding applications in Japan. But Joseph Lubin, co-founder of ETH,  cautioned that some of the ICOs have been plain old scams.

In the US, the Department of Justice (DOJ) and the Federal Bureau of Investigations (FBI) began clamping down on fraudulent virtual currency transactions after the FBI issued a first of its kind report analyzing the likelihood and consequences of illegal activities involving virtual currencies in April of 2012. Less than a year later, in March of 2013 the Financial Crimes Enforcement Network (FinCEN) enacted registration requirements for money service businesses (MSB) dealing in virtual currencies before the first ICO launched in July of the same year.

ICO’s regulation

With the known ICO related risks in mind, global regulators, legislators and central bankers have been working on devising effective regulatory measures to mitigate concerns over security, consumer protection and financial crime.

The first country to regulate ICOs was the US Securities Exchange Commission (SEC), which on July 25, 2017, issued a landmark opinion concerning digital assets stating that ICOs can sometimes be considered securities — and as such are subject to strict laws and regulations.

Putting the new SEC law to use: (1) the SEC brought charges against two companies and their operator for defrauding investors in a pair of fraudulent ICOs and (2) ICO token holders served Tezos with two potentially groundbreaking class action lawsuits alleging that its $232 mln ICO violated US securities laws and misled investors.

Since SEC’s ICO pronouncement, twenty-eight countries have proposed or enacted ICO legislation in an uncoordinated fashion. Some countries mimicked the SEC in regulating ICOs as a security. Other countries like China abruptly banned ICOs and shut down all virtual currency exchanges.

Other US laws applicable to ICOs in addition to SEC laws

With the enactment of ICO regulations, institutional investors have become increasingly interested in investing in them. Here are other US laws they should take into consideration in addition to the SEC laws when evaluating an ICO for investment.

  • CFTC on ICO Tokens: Commodity Futures Trading Commission (CFTC) regulates virtual currencies/tokens as commodities. A commissioner explained, “crypto-tokens offered in a pre-sale can transform. They may start their life as a security regulated under SEC from a capital-raising perspective but then at some point – maybe possibly quickly or even immediately – turn into a commodity." This is how many understand the simple agreement for future tokens (SAFT) concept because no bright-line rule determines which types of tokens are securities and which are not. Instead, what qualifies as a security can only be determined by a facts-and-circumstances-driven analysis of particular tokens.
  • FinCEN on Foreign Virtual Currency Businesses: According to a spokesman for FinCEN, “A foreign virtual currency business may have to register with FinCEN depending on several factors. If the foreign virtual currency company is registered with, and functionally regulated or examined by the SEC, CFTC or if it engages in activities that, if conducted in the US would require it to register with the SEC or CFTC, then it would not have to register as an MSB with FinCEN. If it does not satisfy this condition, the answer depends on how it operates, on behalf of whom and where its customer base is located based on a facts-and-circumstances-driven analysis.”
  • IRS on Foreign Virtual Currency Businesses: A foreign virtual currency business may be subject to US tax laws because virtual currencies are characterized as property according to Notice 2014-21, gains of which are subject to federal taxation and tax reporting requirements under Information Reporting and Backup Withholding, Foreign Account Tax Compliance Act (FATCA), Country-by-Country Reporting (CbCR). The IRS may claim jurisdiction over a foreign virtual currency business that lacks any physical presence in the US, so long as they do substantial business in the US based on a facts-and-circumstances-driven analysis. According to the new chief of the IRS Criminal Investigation division, “in 2018: (1) the Nationally Coordinated Investigations Unit, and (2) the International Tax Enforcement Group will be increasingly focused on the cross-border use of virtual currencies.”

Conclusion

As regulations fall on ICOs around the world, it opens the doors for institutional investors to partake in ICOs of companies that may have a global footprint from a business, technological and legal structure standpoint. This requires sophisticated evaluation of all ICO related risks in all jurisdictions the company operates. “ICO companies, their executives and institutional investors should carefully take into consideration the ever-changing regulatory landscape around the world and implement a good compliance program. An ICO company needs to comply with various countries regulations including money-laundering regulations and anti-bribery laws, while minimizing risk,’’ advised John Kearney of MyComplianceOffice.

Disclaimer: This article is adapted with permission from Tax Management Memorandum, 58 TM Memorandum 418, 10/16/17. Copyright 2017 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com.

Selva Ozelli, Esq., CPA is an international tax attorney and CPA who frequently writes about tax, legal and accounting issues for TaxNotes, Bloomberg BNA, other publications and the OECD.

Source: Coin Telegraph




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Vitalik Lays Out Ethereum 2.0 Roadmap In Taiwan

The future of Ethereum, according to co-founder Vitalik Buterin

Vitalik Buterin, co-founder of Ethereum, has laid out the future plan of the Blockchain technology-based platform at a conference in Taipei, dealing with some of the biggest problems in Ethereum and suggesting how the future might shape up. Having already provided a substantial amount of information, the new update from Buterin gives more specific details.

The statement from Buterin began with a sort of tongue-in-cheek commentary on the many Ethereum replacements that have come on the market in recent months. According to the young computer scientist:

“The Ethereum killer is Ethereum, the Ethereum of China is Ethereum, the Ethereum of Taiwan is Ethereum… 2.0.”

Biggest issues ahead

Buterin continued by describing the four areas where he sees a need for improvement on the current Ethereum platform. These were privacy, consensus safety, smart contract safety and scalability.

For each of the first three, the Ethereum co-founder sees a solution that is actively developing. In the area of privacy, the Byzantium hard fork has created the ability for zk-SNARKs, a solution that Vitalik sees as a viable one with continued implementation. For consensus safety, the recent development, nicknamed ‘Casper,’ should bring solutions, and for smart contract safety, Viper and formal verification can produce real solutions.

Easy

However, the problem of scaling is substantial. Vitalik explained that decentralization, scalability and security are a complex trifecta that can present major challenges in the future. While it’s relatively easy to have any two of the three creating a system where all three are functional has proven difficult.

Scalability on the Ethereum, according to Buterin needs to be thousands of transactions per second, be on-chain only, and be without any supernodes. In other words, it must deal with all three of the issues. The solution, per Vitalik, is found in sharding or allowing side chains were protocol changes can be upgraded while keeping the main chain intact.

The change from Proof of Work to Proof of Stake will be a requirement, and Buterin indicated that the timeline is likely three to five years, though he sees a substantial amount of change happening in the near term, as these upgrades begin to take shape.

Source: Coin Telegraph




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