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Virtual Currencies

This category contains 43 posts

Detecting Suspicious Activity on the Bitcoin Blockchain

It is a globally accepted belief that financial crimes such as money laundering, fraud and the financing of terrorism are societal evils warranting enormous preventative and investigative efforts.  Such a belief has been translated into a corpus of guidelines, principles, statutes and implementing regulations around most of planet Earth known as anti-money laundering (AML) and countering the financing of terrorism (CFT) or AML/CFT.

Generally speaking, AML/CFT regulations are intended to deter criminal activity before it happens, and to detect it when it has happened.  Because doing this on their own would be an impossibly gargantuan task, governments issue regulations whereby they deputize financial intermediaries as crime fighters on behalf of the public.  Each and every financial service provider categorized by law as an “obligated subject” is thus mandated to implement processes, procedures and controls aimed primarily at warding off criminals and, if they manage to penetrate the financial institution, identify them, report them, and ideally stop them in their tracks.

The primary crime deterrent is the obligation to identify customers and beneficial owners, a process known as customer due diligence (CDD) or Know Your Customer (KYC).  The Continue reading

Bitcoin, Blockchains and Regulation

Blockchain-based technologies could revolutionize not only how companies operate but also how regulators and law enforcement officers perform their supervisory and investigative duties. Could the transparency, user-defined privacy and programmability of blockchains minimize market failures and reduce the need for regulation?

The First Blockchain

Through an ingenious combination of well-known technologies and economic incentives, Bitcoin brought about one of the most exciting and potentially transformative inventions in modern history —the ability to achieve consensus and guarantee truth without a central authority and with censorship-resistance. So revolutionary is this breakthrough that it has ignited a gold rush of investment and creativity similar to the pre-browser years of the Internet.

Blockchains were born with Bitcoin. And by Bitcoin I do not mean bitcoin (lowercase), the volatile and supposedly anonymous virtual currency that is not controlled by any third party, and allows individuals with Internet connectivity to send and receive value in any amount, globally, and almost for free. Lowercase bitcoins are an inextricable component of this new technology, and a uniquely significant one that transcends their monetary nature. They are digital containers that can be programmed to represent digitally “anything of value,” such as a security, a medical record or a work of art.

Bitcoin (uppercase) is an open source software that runs as a distributed network made up of thousands of smaller computers —nodes— that jointly certify the ownership and transfer of value without having to trust one another. In this sense, Bitcoin acts as as a semi-autonomous robot that utilizes advanced cryptography to enforce rules embedded in its core that guarantee everyone’s honest behavior. Part of that enforcement mechanism consists of recording transactions in a counterfeit-proof and immutable ledger that is also distributed to all participants in the network. This public ledger —Bitcoin’s database— is called the blockchain. Continue reading

2014-12-01 Crypto-Timeline

Here is a log with relevant legal, regulatory, law enforcement and business risk milestones in the race of crypto-currencies to maturity with links to trusted sources.

This November was an extremely quiet month -only four meaningful events, a 19-month low!

The  Key NOVEMBER 2014 Crypto-Events were:

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2014-11-01 Crypto-Timeline

Here is a log with relevant legal, regulatory, law enforcement and business risk milestones in the race of crypto-currencies to maturity with links to trusted sources.

This October was an extremely quiet month.  The number of crypto-events reached a 17-month low.

The  Key OCTOBER 2014 Crypto-Events were:

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“My Taxes Pay Regulators, so I Expect Them to Treat Me With Respect”

[Reading Time: 9 minutes]

Interview with Aaron Greenspan, Harvard graduate, original creator of “The Facebook,” payments innovator, and autodidact non-lawyer.  (PART THREE)

Aaron was generous both in his time and in his responses, which led me to split the interview into three parts:  In PART ONE: REGULATION AND INNOVATION IN THE UNITED STATES, Aaron talks about United States money transmitters laws and identifies, with unusual clarity and depth, what he believes is wrong with them.

In PART TWO: BITCOIN, COMMUNISM AND THE SURVEILLANCE STATE, Aaron lays out his controversial point of view on Bitcoin.

Read on for PART THREE: A YOUNG FINTECH ENTERPRENEUR’S DAY OF RECKONING, the final and most controversial one, in which Aaron has no qualms about naming and shaming some of the individuals that have not “treated him with respect.”  Again, here is a brief intro on Aaron, for the benefit of those who haven’t read the previous posts.

Having been a teen tech entrepreneur, during college at Harvard in 2003 Aaron created the predecessor to Facebook, Inc., which also happened to be called “The Facebook.”  In 2009, he entered into a settlement Continue reading

2014-10-01 Crypto-Timeline

Here is a log with relevant legal, regulatory, law enforcement and business risk milestones in the race of crypto-currencies to maturity with links to trusted sources.

September was also a very quiet month.  The number of crypto-events reached a 14-month low.

The  Key SEPTEMBER 2014 Crypto-Events were:

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“Bitcoiners Are Repeating Forgotten History, and Are Accordingly Doomed”

[Reading Time: 8 minutes]

Interview with Aaron Greenspan, Harvard graduate, original creator of “The Facebook,” payments innovator, and autodidact non-lawyer.  (PART TWO)

Aaron was generous both in his time and in his responses, which led me to split the interview into three parts.  In PART ONE: REGULATION AND INNOVATION IN THE UNITED STATES, Aaron talks about United States money transmission laws and identifies, with uncommon clarity and depth, what he believes to be wrong with them.

Read on for Aaron’s point of view on Bitcoin, preceded by the intro to the first post for the benefit of those who haven’t read it, yet.

Having been a teen tech entrepreneur, during college at Harvard in 2003 Aaron created the predecessor to Facebook, Inc., which also happened to be called “The Facebook.”  In 2009, he entered into a settlement agreement with Facebook, Inc. as well as his classmate Mark Zuckerberg, and then had the opportunity to figure out what he wanted to do next, so he followed a long-standing interest in payment Continue reading

“US Money Transmission Laws Are Worthless and Unconstitutional”

[Reading Time: 10 minutes]

Interview with Aaron Greenspan, Harvard graduate, original creator of “The Facebook,” payments innovator, and autodidact non-lawyer.  (PART ONE)

Having been a teen tech entrepreneur, during college at Harvard in 2003 Aaron created the predecessor to Facebook, Inc., which also happened to be called “The Facebook.”  In 2009, he entered into a settlement agreement with Facebook, Inc. as well as his classmate Mark Zuckerberg, and then had the opportunity to figure out what he wanted to do next, so he followed a long-standing interest in payment systems and decided to try and tackle mobile payments.  From 2008 through early 2011, he invested essentially every piece of time, energy and capital at his disposal into making his payments initiative, called FaceCash, widely regarded as a success—until he was told that he would be thrown in federal prison by a state bureaucrat.

As you will soon see, to say that Aaron does not mince his words is the understatement of the century, so I am aware of the risks I am taking by presenting his strong point of view here. However, even Continue reading

2014-09-01 Crypto-Timeline

Here is a log with relevant legal, regulatory, law enforcement and business risk milestones in the race of crypto-currencies to maturity with links to trusted sources.

Quite an uneventful month this past one has been.  The number of crypto-events reached a 13-month low.  Could it be that Bitcoin is finally getting “boring?”

The  Key AUGUST 2014 Crypto-Events were:

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2014-08-01 Crypto-Timeline

Here is a log with relevant legal, regulatory, law enforcement and business risk milestones in the race of crypto-currencies to maturity with links to trusted sources.

The  Key JULY 2014 Crypto-Events were:

Continue reading

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