XRP News Update: Regulation on Page One

Hodor

Hodor

I blog about Ripple & XRP. FULL DISCLOSURE: All views are my own. I do not work for Ripple; I am not a professional financial analyst, and the majority of my crypto holdings are XRP.

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The championing of a decentralized, no-counter-party digital asset is a tricky business.

Ripple knows what I'm talking about.   Since the original team founded the company, they've accumulated real-world experience - some of it acquired through unintentional mistakes made during its very first year in operation - and also hired senior law professionals to help guide them.

Compliance with banking and money-transfer rules on an international level is not meant for the faint-of-heart, and required the company to get up-to-speed on very complex, gray-area topics prior to expansion in specific corridors and lines of business.

And I'm guessing that it also played a part in the very fabric of the code that they wrote, on some level.

In the meantime, look at what's happened to mainstream media sentiment after we've survived the gloom-and-doom of the 2018 Crypto Winter along with the dire predictions from respected icons of the financial 'old guard;'  the major market players are now moving forward with wide-scale global adoption of digital assets in selected corridors and markets, and we're also hearing rumblings of mainstream companies wanting to 'get in' on digital currency, no matter how misguided their understanding.

And Ripple stands downstream in the middle of a small-but-bubbling brook, ready.

They've carefully constructed regulation-compliant software over the course of years, based on hard experience and anticipated market direction.   Soon, the trickle of interest in using a no-counter-party digital asset for global settlement will become a gushing torrent of adoption.   And while some companies experiment with debt instruments disguised as cryptocurrencies, the visionary players in the market will be able to see past the noise to the one company that is laser-focused on only one thing: Being the best at payments.

And that company's preferred digital asset?   XRP.

General Crypto News

FATF stands for the 'Financial Action Task Force,' a group that was, in turn, created in 1989 by the G7, a group of countries representing over half of the world's combined wealth.   The G7, in turn, was created in 1973, around the time of the world oil crisis.   While the G7 is quite exclusive in its membership, the FATF has sought to partner with a large number of member countries to institute anti-money-laundering (AML) standards.  1   2

There are currently 36 member jurisdictions in the FATF.  3

According to its own website, FATF's goal is to:

"...  set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.

The FATF is therefore a 'policy-making body' which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas."

FATF's response to the increasing popularity of cryptocurrency exchanges has now given rise to its new recommendations, which have been making headlines in the last week.   Bloomberg recently wrote an article profiling the new FATF proposals, saying:   4

"The guidelines will require companies ...  to collect information about customers initiating transactions of over $1,000 or 1,000 euros, as well as details about the recipients of the funds, and to send that data to the recipient’s service provider along with each transaction."

What does this mean for exchanges?

Essentially, crypto exchanges will, unless they are in a non-FATF jurisdiction, probably be required to collect 'KYC' information on each of their customers.   I say 'probably,' because it's still ultimately up to the individual countries and exchanges, but history has shown that FATF recommendations are followed in a high percentage of cases.

From my standpoint, this is an interesting and expected development, and goes to show how crypto has now grown to a point where international regulatory bodies have been forced to give the new market their due consideration.

One positive outcome that could result from the new rules, is an apprehension of criminals that seek to steal crypto;  if exchanges are required to perform KYC across the board, then these criminals will be more easy to identify when they go to 'cash out' their stolen property.

Ripple News

The big news from Ripple in the past week was their expansion into Brazil.

Publishing an Insights article about the recent focus on South America, Ripple indicated that they'd hired a new Managing Director to lead their expansion:

"Ripple, the global leader in enterprise blockchain solutions for cross-border payments, launches operations in Brazil to expand its footprint in South America.

In addition, Ripple is also bringing on seasoned fintech entrepreneur and executive Luiz Antonio Sacco as managing director to drive strategy and build the Ripple ecosystem in the region."

The article also contained some other interesting tidbits for XRP fans looking to learn a bit more about potential new xRapid corridors;  in recent high-level presentations, examples including South American countries were mentioned.  The article identified three specific nations:

"The company saw more transactions on the network in Q1 ’19 than it did in all of 2018.  In 2019, Ripple is focused on growing its customer base and team in Brazil, and across South America including in countries such as Chile, Peru and Argentina."

Each of these countries is responsible for a sizeable remittance market, according to data from the World Bank and Pew Research Center.   5   6   The following is the size of the latest annual remittance flows for each of the countries mentioned:

  • Chile:  $572 million (2018 World Bank numbers)
  • Peru:  $3 billion (2017 Pew Research numbers)
  • Argentina:  $1 billion (2018 World Bank numbers)

It should be noted that the South American market, while already significant enough to compete with some of the high-frequency Asian markets already covered by RippleNet, is still growing, and expected to only grow larger with time.   7

South America is a natural, new focus for RippleNet's growing global coverage.

New xRapid Corridors

In recent public presentations, we've heard both David Schwartz and Brad Garlinghouse make references to countries and corridors beyond the publicly-announced Philippine and Mexico corridor(s).   These happened at the New York Consensus conference and the 9th High-Level Conference on the International Monetary System for the Swiss National Bank.   8   9

In one of her latest videos, CryptoEri, a popular vlogger about cryptocurrency and XRP, analyzes these two potential additions to xRapid in a bit more detail:

CryptoEri spends some time analyzing the remittance statistics for both Argentina and Brazil, along with other countries in the region with significant cross-border numbers - specifically the ones mentioned in Ripple's recent Insight blog.   The specific South American countries mentioned there include Chile, Peru and Argentina.

I recommend this video for those that may be wishing to learn a bit more about Ripple's potential new xRapid corridors.

Ripple Profiled In Law.com Article

Stuart Alderoty joined Ripple in January of this year as their new General Counsel.   His resume includes a position as Executive Vice President at CIT, a bank headquartered in Pasadena, California.   CIT has roughly sixty branches located in Southern California, and an online bank as well.   10

In addition to CIT, Stuart Alderoty has worked for other prominent banks, including HSBC and American Express;  these positions undoubtedly provided him with deep practical knowledge of Western banking regulations and law, making him ideal for guiding Ripple through challenges of compliance and risk management.   11

On June 12th, a popular law journal, Corporate Counsel, published an interview with him.   The interview covered his first five months at Ripple, as well as his perspective on some of the legal challenges that face the company as it seeks to expand and continue its takeover of bank and financial messaging infrastructure from the aging SWIFT system.  12

The interview was engaging for me, because he indicated that navigating the complex legal minefields in blockchain technology are not just about simple compliance of well-defined rules;  in fact, he indicated that for some new industries, it was necessary to apply a combination of common sense, logic, and knowledge of regulatory direction to anticipate what actions would invite risk.

While this is probably common sense to seasoned professionals like himself, it was fascinating listening to his perspective on a couple topics that have been hotly debated over social media.   Here are two questions from the interview:

Question (Caroline Spiezio):  "So without regularity, you use what’s happening in the markets to make an informed decision?"

Answer (Stuart Alderoty):  "The market is one of many factors.  For any jurisdiction where the laws, rules and regulations have not yet been clarified, there is usually a basis of law that you can find either in the common law or statutory law.  Then you have to make your own analysis of whether what the company wants to do can comfortably fit in that body of law in the absence of a regulator expressly saying publicly that they have reached the same conclusion.

So it’s three components:  looking at the existing body of laws, rules and regulations, which includes common law, statutes, regulations, conducting our own analysis and, three, looking oftentimes at the market itself, if it’s moving on and making decisions for itself."

Question (Caroline Spiezio):  "If you could get regulatory clarity on one issue, what would it be?"

Answer (Stuart Alderoty):  "I think the issue of the day that everyone is talking about is which digital assets are securities and which digital assets are not securities.

The (Securities and Exchange Commission) is trying to work hard to solve for that.  They’re issuing guidance, bringing enforcement actions, which is a way for regulators to point to the industry and say, ‘That’s what we think.’  They’ve issued one no action letter and have indicated more no action letters may come.  That’s their way of telling the industry, 'That’s what we think good looks like.'   So they’re starting to develop the guardrails.

I think greater clarity on that point would be welcomed by all of the market participants.  That being said, I think this is one area where the market is moving on and making decisions for themselves."

It was great to hear his perspective on the topics that have been ceaselessly discussed over social media by those of us trying to gauge the market;  I recommend reading the entire interview for those that are aiming to dive deeper into Ripple's commitment to regulatory compliance.

Investment Association of China

The Investment Association of China is a state-run national organization founded in 2001.   The purpose of the organization is to help develop

"...  and reform ...  the country's economy and society."

The organization is comprised of both public and private members:   13

"After 10 years of development, the China Investment Association has more than 1,000 members, including state-owned, private and foreign-funded enterprises, as well as experts and scholars, covering almost all industries."

On June 12th, SBI Group officially announced that Yoshitaka Kitao was appointed as a strategic investment and high-level advisor to the blockchain / big data industrial investment committee of the IAC, along with this comment:  14

"The Blockchain Big Data Industry Investment Specialty Committee is one of the 17 committees that make up the China Investment Association, which is an incorporated association in China, and leads and supports investment activities in the blockchain big data industry.

We joined the China Investment Association in April this year as a Vice-chairman member, and Kitao's 'Strategic Investment Senior Advisor' is the highest-ranking title given to private-sector executives."

The appointment is an important development for SBI, and provides a line of communication directly to decision-makers in China's leadership when it comes to blockchain technology.

In addition, the appointment of SBI's CEO to this prestigious advisory position may be a signal that China understands the possible importance of trust-less, no-counter-party digital assets;   while we can only speculate about the possible impact for XRP, Yoshitaka Kitao's new advisory role is clearly an important and positive development for blockchain technology as a whole.

Kava News

On May 23rd, Kava formally announced Switch:

Kava Labs Tweet announcing Switch

Switch is the small start-up's desktop application that can transform one cryptocurrency into another using micropayments processed over the Interledger network of connectors, in combination with each network's off-chain processing capabilities.   In the case of XRP, that means Payment Channels, XRP's native capability allowing off-chain processing of transactions in bulk.

In the blog associated with their announcement of Switch, the team indicated that they were still working on "ERC-20 tokens such as Dai," and were planning to release new code supporting these additional assets in the near future.

Now, less than three weeks later, Kava announced an update to their desktop application allowing it to transform Ethereum-based ERC-20 tokens:

Kava Labs Tweet

For those that don't know what ERC-20 tokens are, they are user-created cryptocurrencies that exist on the Ethereum network, and must conform to a set of predefined criterion.

This announcement is a significant advancement for Interledger.

The observation made by Kincaid O'Neil, a Software Engineer at Kava, portrayed its importance for Interledger:

"With the vast number of ERC-20 tokens, the completion of this work considerably expands the asset support of the Interledger network.

With BTC, ETH, and XRP already supported, this new addition of ERC-20 tokens enables Interledger to connect more assets compared to Ethereum-based DEXs or the Bitcoin Lightning Network alone."

If you've ever browsed some of the Ethereum-based DEX's like I have, you know how many assets this implies;  hundreds are actively traded.   This is due to the wave of ICOs that crashed over the Ethereum network during the golden age of ICO fund-raising in late 2017 and early 2018.

If you'd like to download and use the beta version of Switch for yourself, please read Kava's original blog that was a part of their formal announcement, and refer to their official website here:   https://kava.io/

XRP News

Every once in a while, an amazing video editor within the XRP Community decides to volunteer their time to create something truly remarkable and inspiring.   I've profiled some of these fan videos in the past, and recently, I encountered an exceptional one created by Andre Ventura:

The video runs twelve minutes, and contains an inspirational beginning that traces some of the origins of the 'blockchain' movement back to the financial crisis during 2008.

It's a pleasant 'setting the stage' video for subsequent education of those that might be interested in either XRP or the larger 'Internet of Value' that it represents.

Kudos to Andre Ventura, and I hope to see more XRP-related content on his YouTube channel as well.

Gatehub Hack: Ongoing Developments

On June 5th, I first wrote about the Gatehub hack, now one of the largest thefts of XRP in history.

In that blog, I covered Gatehub's official statement on the theft, along with their initial advice to customers.   Unfortunately, the hack took place over five days before slowing, emptying many people's wallets;  it was like watching a train wreck in slow motion.   On June 12th, Thomas Silkjær published a timeline of the hack with two measurements:  The amount stolen versus the amount cashed out.   The latest version of his chart, as of June 14th, is as follows:

Thomas tweet about hack timeline

While the theft of XRP seemed to taper off at around June 5th, with a few more thefts occurring afterwards, it appears that the 'cashout' of XRP at exchanges is still ongoing.   He's continuing to contact exchanges as the XRP flows are tracked, but it is an overwhelming task.   He also suspects that the criminals are now monitoring his own public communications, and that of XRP Forensics.

Tracking the stolen XRP is a challenging volunteer effort;  in some cases, exchanges are also working to help bring these criminals to justice.

Changenow.io

One exchange that acted to prevent further 'cashout' of the stolen XRP was Changenow.io.

The company publicized how the criminals responsible for the theft of XRP had attempted to use its exchange, along with the amount of XRP it was able to prevent from being 'cashed out:'

Changenow tweet about XRP theft

Their blog noted the write-up done by XRP Forensics about the flow of XRP and indicated that the exchange had received a list of malicious addresses and blacklisted the ones connected with the hack.

As for the 500K XRP that the exchange managed to freeze, they said:  15

"All stolen exchange deposits retained during the hack have been frozen and are stored on a secure cold wallet.  We will be sure to return the funds to GateHub."

When I contacted Gatehub about the statements from Changenow.io, they indicated that, for now, they are not commenting until the theft's criminal investigation is complete.   Gatehub also replied that:

"With the help of law enforcement, we are working hard to finish the investigation.  As soon as this (will happen) we will put out an official statement ..."

It's great to know that some exchanges like Changenow.io are actively working with Gatehub to return some of the stolen funds to those affected by the theft.

How To Re-Key An XRP Wallet

Related to the recent XRP theft, it would be great for people to learn what to do in advance of having to re-key an XRP wallet.

One of the solutions or reactions that some people took was to either move their XRP into a new wallet, or to 're-key' their existing one.   In regards to re-keying, Bithomp recently published a video on how users can do this by showing a step-by-step guide:

Note that the video shows how to do this using Bithomp tools;  however, an astute XRP fan or developer can learn how to do this themselves as well, by constructing their own signed transactions and 'sending them' to the XRPL.

In addition, it's possible for individuals to 'practice' this method on the XRPL 'testnet' prior to attempting to actually do this on one of their important wallets.

XRP Arcade Updates

If you own XRP, there are some sites that I highly recommend you investigate to keep updated on your investment.

One of those sites is XRP Arcade, a volunteer fan site independently run and maintained by Leonidas Hadjiloizou:

XRP Arcade Cover Graphic

XRP Arcade contains an amazing amount of curated information about XRP the digital asset, the exchanges that support its trading (over 330 now), the businesses that use XRP or support its use as a method of payment, businesses that are a part of the overall ecosystem of XRP technology, such as the Interledger Protocol, handy info-graphics, information about wallets, and news items organized chronologically for quick reference.

XRP Meetups

On June 10th, Leonidas Hadjiloizou announced that he'd be adding information about XRP meetups to the 'event' section of XRP Arcade:

XRP Meetup Tweet about XRP Arcade Website

In the first half of 2019, there have already been a number of XRP meetups in various countries, and a large one is currently being planned for Japan in mid-November, as indicated in the linked reference in the tweet.

Hopefully this centralized listing of meetups will prompt more people to research and find one that is convenient to attend;  it's great to get together with other XRP fans at these events, have fun and 'talk XRP' with other like-minded individuals.

Micro-Tipping For Surveys

In addition to other updates at XRP Arcade, Leonidas Hadjiloizou has now pioneered the use of XRP micropayments to reward survey participation.

In an effort to follow-up on a basic demographic survey I took in relation to a recent Coil blog, he decided to construct a much more detailed survey;  however, he also wanted to reward people for participating, and worked to construct a mechanism to do so.

To support data integrity, he decided to use Google's OAuth identity verification to reduce instances of fraud;  to complete a survey and receive the XRP, the individual must verify themselves through their Google account:

Tweet from Leonidas about XRP Arcade

In addition to his own first use of the application to reward people for survey participation, Leonidas indicated that the code is freely available for others to use on their own websites, or to drive traffic to a particular page:

"Website owners can use the Tipper to attract traffic to their website or a specific page they wish to promote.

They can set the amount of XRP they wish to tip, the frequency and the task (visit the website, complete a survey, view a video, etc)."

He wrote a blog about it here:   https://xrpcommunity.blog/introducing-the-xrparcade-tipper/

This is a fantastic innovation by Leonidas, and I foresee other sites using this tool for limited-time promotions of content;  sort of like a crypto 'tap' that is linked to visiting specific pages.   Who wouldn't like to easily earn a few drops of XRP as they browse?

The idea is similar to one proposed by Coil's Sabine Bertram in January of this year;  her idea centered around using ILP for remunerating survey participants, while Leonidas's tool is specific to XRP, and uses the XRP Tip Bot for processing.

Thanks to Leonidas Hadjiloizou for two major accomplishments rolled into one:  Collection of detailed XRP Community demographics, and the pioneering use of XRP Tip Bot micropayments to reward people for participation in surveys.

Crypto.com

It seems that increasing numbers of exchanges are opting to attract and retain customers by offering deals where the person can 'earn interest' on deposits.

It's an attractive option for some that are opting to sit on the sidelines instead of actively trading their crypto, and different exchanges have different programs and incentives in place for them.

On October 3rd of last year, Crypto.com added support for XRP to their wallet.   The site is owned by a company headquartered in Hong Kong, and purchased the famous domain name from Matt Blaze for an undisclosed amount of money.   They now run a combination wallet, card app, and exchange.

The company has taken multiple steps of late to support the fast-growing XRP community of owners, adding options like 'direct top-up of their Visa card,' and now the ability for XRP owners to earn interest on their XRP deposits at the exchange:

Link to blog about cryptoDotCom service

The fascinating part about the company's announcement is that the option doesn't seem to be available for a litany of jurisdictions:

"Crypto Credit Eligibility - Crypto.com Wallet & Card App approved users except citizens or residents of Hong Kong SAR, Singapore, Switzerland, Malta, or the United States of America.

Efforts are underway to make these products available to these jurisdictions."

When I asked the Chief Strategy Officer of crypto.com, Eric Anziani, about this limitation, he indicated that:

"Earn is now available in Singapore.   We are working to make it eligible in all markets:  We have some good news for some of the markets you mentioned.  

Stay tuned!"

Even though some of these options may only be available to a limited number of customers at first, it's exciting to see another potential option develop for crypto owners to earn interest.   Hopefully the new service can be rolled out to additional customers as indicated by the exchange's CSO.

Note:  I do not personally endorse any exchanges, wallets, or services.

Beaxy

A new, Nevis-based crypto exchange named 'Beaxy' opened on June 10th:

Beaxy Exchange Tweet

So where is Nevis?   It's in the Caribbean, but according to news reports, the development team is located in Armenia.   16

The exchange will support an XRP - BTC pairing at launch.

One feature of Beaxy that I haven't seen elsewhere is a 'tax reporting tool.'  17   While I don't know how the tool works, one of the annoying aspects of crypto trading for those of us in the US is the requirement that we report gains and losses for each crypto transaction.   This means attempting to ascertain this information on our own using third-party information, normally.   If Beaxy takes care of this annoying task for customers, I can see it being a powerful distinguishing characteristic of their exchange.

Thanks to Leonidas for coverage of Beaxy's announcement.

Where Will You Be When History Is Made?

Don't be caught sleeping when the world wakes up to cryptocurrency.

Keep up to date on the latest crypto news impacting XRP and its ecosystem of businesses, technology, and other stakeholders.   Subscribe to my XRP Community Blog, or my Coil Blog;  and don't forget to support businesses and other like-minded fans in the XRP Community!

xrp symbol Sources and Credits:

Cover Art: Thank you to Bruce Mars

  1. https://www.fatf-gafi.org/about/historyofthefatf/
  2. https://en.wikipedia.org/wiki/Group_of_Seven
  3. https://www.fatf-gafi.org/about/membersandobservers/
  4. https://www.bloomberg.com/news/articles/2019-06-11/crypto-exchanges-are-facing-biggest-regulatory-hurdle-yet
  5. http://www.worldbank.org/en/topic/migrationremittancesdiasporaissues/brief/migration-remittances-data
  6. https://www.pewresearch.org/global/interactives/remittance-flows-by-country/
  7. https://www.thedialogue.org/wp-content/uploads/2017/02/Remittances-2016-FINAL-DRAFT.pdf
  8. https://twitter.com/Dave_Jonez_02/status/1128678553690738689
  9. https://www.youtube.com/watch?v=ic4Zjv-I-ks
  10. https://en.wikipedia.org/wiki/CIT_Group
  11. https://www.businesswire.com/news/home/20190130005183/en/Stuart-Alderoty-Joins-Ripple-General-Counsel
  12. https://www.law.com/corpcounsel/2019/06/12/driving-in-blockchains-legal-guardrails-how-ripples-general-counsel-works-with-regulators/
  13. http://www.iac.org.cn/default.asp?pg=21&channel_id=10&item_id=2
  14. http://www.sbigroup.co.jp/news/2019/0612_11570.html
  15. https://changenow.io/blog/gatehub-statement
  16. https://btcihowtoinvest.wordpress.com/2019/06/12/beaxy-launches-crypto-trading-platform/
  17. https://coinjournal.net/beaxy-launches-crypto-trading-platform/

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Hodor

Hodor

I blog about Ripple & XRP. FULL DISCLOSURE: All views are my own. I do not work for Ripple; I am not a professional financial analyst, and the majority of my crypto holdings are XRP.

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