A man spent millions on an enormous plot of land near Reno. Now he wants to build a community based on the blockchain technology introduced by Bitcoin.

STOREY COUNTY, Nev. — An enormous plot of land in the Nevada desert — bigger than nearby Reno — has been the subject of local intrigue since a company with no history, Blockchains L.L.C., bought it for $170 million in cash this year.

The man who owns the company, a lawyer and cryptocurrency millionaire named Jeffrey Berns, put on a helmet and climbed into a Polaris off-road vehicle last week to give a tour of the sprawling property and dispel a bit of the mystery.

He imagines a sort of experimental community spread over about a hundred square miles, where houses, schools, commercial districts and production studios will be built. The centerpiece of this giant project will be the blockchain, a new kind of database that was introduced by Bitcoin.

After his driver stopped the Polaris on a high desert plateau, surrounded by blooming rabbit brush and a grazing herd of wild horses, Mr. Berns, who is 56, pointed to the highlights of his dream community.

“You see that first range of mountains,” he said, pointing south. “Those mountains are the border of our South Valley. That’s where we’re going to build the high-tech park,” a research campus that would cover hundreds of acres. There are also plans for a college and an e-gaming arena.

As strange — even fantastical — as all this might sound, Mr. Berns’s ambitions fit right into the idiosyncratic world of cryptocurrencies and blockchains.

The blockchain began as a digital ledger on which all Bitcoin transactions are recorded. Some aficionados have grander plans. They think it could be a new way of taking power back from the institutions they believe are calling all the shots.

Just as Bitcoin made it possible to transfer money without using a bank, blockchain believers like Mr. Berns think the technology will make it possible for ordinary people to control their own data — the lifeblood of the digital economy — without relying on big companies or governments.

There is a fuzzy line between these utopian visions and get-rich-quick schemes. Several cryptocurrency projects have been shut down by regulators; apparent hucksters have been arrested; and a plan to transform Puerto Rico with cryptocurrencies has been criticized as nothing more than a bid to take advantage of the island’s status as a tax haven.

Mr. Berns was drawn to Nevada by its tax benefits, including the lack of income taxes. And the breadth of his ambitions certainly raises the risk of a boondoggle.

But he is different from his crypto-brethren in one big way: He is spending his own money. So far, he said, he has spent $300 million on the land, offices, planning and a staff of 70 people. And buying 67,000 largely undeveloped acres is a bit of old-fashioned, real estate risk-taking.

Still, Mr. Berns said his ambition was not to be a real estate magnate or even to get rich — or richer. He is promising to give away all decision-making power for the project and 90 percent of any dividends it generates to a corporate structure that will be held by residents, employees and future investors. That structure, which he calls a “distributed collaborative entity,” is supposed to operate on a blockchain where everyone’s ownership rights and voting powers will be recorded in a digital wallet.

Mr. Berns acknowledged that all this is way beyond what blockchains have actually accomplished. But that hasn’t discouraged him.

“I don’t know why,” he said over the roar of the Polaris engine. “I just — something inside me tells me this is the answer, that if we can get enough people to trust the blockchain, we can begin to change all the systems we operate by.”

Mr. Berns has managed to win over local officials who are eager for economic development. Nevada’s governor, Brian Sandoval, read a proclamation that named the Blockchains property “Innovation Park” at an event last month where Mr. Berns sat on a panel with the governor and Elon Musk, the chief executive of Tesla.

Tesla’s Gigafactory in Nevada, which has been described as the largest building in the world, is surrounded by Blockchains’ land. Companies like Google, Apple and Switch also have properties in the industrial park that is surrounded by Mr. Berns’s holdings.

This week, he announced a memorandum of understanding with one of the state’s main power companies, NV Energy, to team up on projects that will run energy transactions through a blockchain.

The Nevada county where this is all located, Storey County, has only about 4,000 residents and was best known, until recently, for its history of silver mining and its modern brothels, including one owned by a county commissioner.

That same county commissioner, Lance Gilman, bought the land surrounding the brothel and turned it into the industrial park where Tesla and Google are now located.

Blockchains has already received preliminary county support for a new town along the Truckee River, with thousands of homes, a school and a drone delivery system, and is working closely with the county on a broader master plan.

But for now, Blockchains is empty land and a repurposed office building. Mr. Berns said the company won’t begin construction on the broader property until late 2019, at the earliest, after putting together the master plan and getting it approved by the county.

The office manager from Mr. Berns’s old law office in Los Angeles, Joanna Rodriguez, moved with her four children and husband to Nevada.

“He has these crazy ideas — but I know that every time he sets his mind to something he will get there,” said Ms. Rodriguez, 29, who has worked with Mr. Berns for eight years and is now the manager of the Blockchains office in Nevada. “That’s why I decided to move.”

Mr. Berns spent most of his professional life on class-action lawsuits, many of them against financial companies. He learned about Bitcoin in 2012 but was won over by another cryptocurrency, Ethereum, which makes it possible to store more than just transaction data on a blockchain.

Mr. Berns bought Ether, the digital token associated with Ethereum, in a big sale in 2015. Thanks to an astronomical increase in the price of Ether and some well-timed selling last year before it crashed, he became wealthy enough to fund his dream project.

Ethereum is what he believes makes his community more than just a giant real estate project. To understand why requires more than a bit of imagination. And faith. Every resident and employee will have what amounts to an Ethereum address, which they will use to vote on local measures and store their personal data.

Mr. Berns believes Ethereum will give people a way to control their identity and online data without any governments or companies involved.

That is a widely shared view in the blockchain community, but there are significant questions about whether any of it can work in the real world. Most blockchain companies have failed to gain any traction, and Ethereum and Bitcoin networks have struggled to handle even moderate amounts of traffic.

Mr. Berns believes that one of the big problems has been security. People have been terrible at holding the private keys that are necessary to get access to a Bitcoin or Ethereum wallet.

He wants to address that with a custom-built system where people’s private keys are stored on multiple digital devices, kept in vaults, so that no one device can gain access to the keys. He has already purchased vaults that are burrowed into mountains in Sweden and Switzerland, and he plans to build additional vaults in the mountains in Nevada.

The other thing holding back Ethereum, Mr. Berns believes, has been a lack of real-world laboratories. His Nevada land, he hopes, will change that.

“This will either be the biggest thing ever, or the most spectacular crash and burn in the history of mankind,” Mr. Berns said. “I don’t know which one. I believe it’s the former, but either way it’s going to be one hell of a ride.”

https://www.nytimes.com/2018/11/01/technology/nevada-bitcoin-blockchain-society.html

The recent decline in the bitcoin price is just few hundred dollars.If the "crypto whales manipulation" theory is right,the whales will try to push the price to a "price crash/panic" level at 4000 USD or maybe under 3K USD. This has nothing to do with Fidelity and their crypto related projects.

By the way,storing bitcoins in nuclear bomb shelters is a stupid idea.Perhaps Xapo abandoned that project.

Financial services giant Fidelity is taking a huge step into cryptocurrency.

The 72-year-old firm announced the launch of a separate company, Fidelity Digital Asset Services, on Monday that will handle cryptocurrency custody and trade execution for institutional investors.

"Our goal is to make digitally native assets, such as bitcoin, more accessible to investors," Fidelity Investments Chairman and CEO Abigail Johnson said in a press release. "We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use."

Tom Jessop, head of Fidelity Digital Assets, said the idea of commercializing a standalone crypto company began in the middle of last year.

For now, its services are available to institutions such as hedge funds, endowments and family offices but not to the retail investor.

"We saw that there were certain things institutions needed that only a firm like Fidelity could provide," Jessop told CNBC, adding that it already works with 13,000 institutional clients. "We've got some technology that we've repurposed from other parts of Fidelity — we can leverage all of the resources of a big organization."

Fidelity is nothing if not big. It administers $7.2 trillion in customer assets, has 27 million customers, and spends $2.5 billion per year on technology, partially through incubators that house its artificial intelligence and blockchain projects. The new digital asset company was born out of Fidelity Center for Applied Technology, or FCAT as employees call it.

The new company will handle custody, or how to safely store digital assets. Crypto companies Coinbase, Gemini (run by the Winklevoss twins), BitGo, Ledger and ItBit are among those already working on similar solutions. Japanese bank Nomura also announced plans in May to offer crypto custody, and Goldman Sachs and Northern Trust are reportedly exploring custodial services. But until now, there's been a noticeable lack of a big U.S.-based incumbent like Fidelity officially entering the space.

Part of the risk in cryptocurrency investing, which experts say has largely barred institutions from embracing these digital assets, is how to prevent them from being hacked. As of the end of June, $1.6 billion in cryptocurrency had been stolen from clients, according to CoinDesk's 2018 State of Blockchain Report.

Cybersecurity a focus
Fidelity has a long history of dealing with enterprise security, as well as public and private key cryptography to make sure it isn't part of that statistic. Its custody solution will include vaulted "cold storage," which involves taking the cryptocurrency offline, and multilevel physical and cyber controls, among other security protocols that have been created leveraging Fidelity's security principles from other parts of the business.

"You might look at the crypto world and say, 'Wow, is this a new thing?' but we've been managing key materials for a long time," Jessop said. "We took our learnings in how to run enterprise security, then through our exploration of bitcoin and some of the people we've hired, quickly developed some of the crypto native expertise and federated the two of those things."

Despite a slump in prices and news of hacks and fraud, acceptance among institutions for cryptocurrency is growing.

Yale's well-known chief investment officer, David Swensen, who manages the school's $29.4 billion endowment, has invested in two funds dedicated to cryptocurrencies, sources told CNBC. Other endowments — for Harvard University, Stanford University, Dartmouth College, Massachusetts Institute of Technology and the University of North Carolina — have also reportedly made allocations in at least one cryptocurrency fund, The Information reported.

The move by Fidelity may encourage more to do so.

In addition to storing cryptocurrencies, Fidelity Digital Assets will use an existing internal crossing engine and smart order router for trade execution. This order router will allow Fidelity institutional customers to execute trades for bitcoin, ether and other assets at multiple market venues. While Jessop didn't say which ones, he said cryptocurrency exchanges have to comply with the same "Fidelity standard" applied in other parts of the business.

"We have a pretty extensive onboarding procedure for these types of counterparties, which involves diligence on their financial strength as well as their regulatory procedures like 'know your customer' and anti-money laundering," he said. "We are certainly only going to connect to those counterparties that we feel good about."

Fidelity's crypto ambitions
Jessop said the project is largely a result of Johnson's early interest. The CEO led the charge into cryptocurrency, one of the riskiest and most volatile asset classes of the past year, as early as 2014.

Fidelity has a few existing cryptocurrency projects: It started bitcoin "mining" at a location in New Hampshire when the digital asset's price was around $180, has a partnership with Coinbase that allows Fidelity customers to check their cryptocurrency balances on the Fidelity app, and in 2015, started facilitating charitable donations in bitcoin.

Johnson "is very interested in this and stays up on developments in the space in quite a significant way," said Jessop, who joined Fidelity in January from cryptocurrency start-up Chain and before that spent 17 years at Goldman Sachs.

The new standalone company, which has about 100 employees and will be headquartered in Boston, is in the process of onboarding its first clients now and will be in the market and "generally available" sometime in early 2019.

Cryptocurrency prices, meanwhile, are still struggling to recover. Bitcoin is down more than 50 percent this year and has yet to get back to its all-time high near $20,000.

Still, Jessop said neither Fidelity nor institutions it services are distracted by price. He compared the technology's long-term potential with moving financial services to the internet.

"No one said when some of these early-stage Internet companies in 2000 were going out of business, 'Gee, the Internet is toast,'" Jessop said. "We don't focus too much on the price. It's a foundational technology — people are trying to get exposure to the trend and expect volatility in the assets themselves."

https://www.cnbc.com/2018/10/15/fidelity-launches-trade-execution-and-custody-for-cryptocurrencies.html

All this month, the European Union's "trilogue" is meeting behind closed doors to hammer out the final wording of the new Copyright Directive, a once-noncontroversial regulation that became a hotly contested matter when, at the last minute, a set of extremist copyright proposals were added and voted through.

One of these proposals is Article 11, the "link tax," which requires a negotiated, paid license for links that contain "excerpts" of news stories. The Directive is extremely vague on what defines a "link" or a "news story" and implies that an "excerpt" consists of more than one single word from a news-story (many URLs contain more than a single word from the headline).

Article 11 is so badly drafted that it's hard to figure out what it bans and what it permits (that's why we've written to the trilogue negotiators to ask them to clarify key points). What can be discerned is deeply troubling.

One of the Directive's "recitals" is Recital 32:

"(32) The organisational and financial contribution of publishers in producing press publications needs to be recognised and further encouraged to ensure the sustainability of the publishing industry and thereby to guarantee the availability of reliable information. It is therefore necessary for Member States to provide at Union level legal protection for press publications in the Union for digital uses. Such protection should be effectively guaranteed through the introduction, in Union law, of rights related to copyright for the reproduction and making available to the public of press publications in respect of digital uses in order to obtain fair and proportionate remuneration for such uses. Private uses should be excluded from this reference. In addition, the listing in a search engine should not be considered as fair and proportionate remuneration." (emphasis added)

Once you get through the eurocratese here, Recital 32 suggests that (1) anyone who wants to link to the news has to have a separate, commercial license; and (2) news companies can't waive this right, even through Creative Commons licenses and other tools for granting blanket permission.

Many news organizations allow anyone to link to their work, including some of the world's leading newsgatherers: ProPublica ("ProPublica's mission is for our journalism to have impact, that is for it to spur reform"), Global Voices (a leading source of global news written by reporters on the ground all over the planet), and many others. These Creative Commons news entities often rely on public donations to do their excellent, deep, investigative work. Allowing free re-use is a key way to persuade their donors to continue that funding. Without Creative Commons, some of these news entities may simply cease to exist.

Beyond sources of traditional news, an ever-growing section of the scholarly publishing world (like the leading public health organisation Cochrane) make some or all of their work available for free re-use in the spirit of "open access" -- the idea that scholarship and research benefit when scholarly works are disseminated as freely as possible.

Article 11's trampling of Creative Commons and open access isn't an accident: before link taxes rose to the EU level, some EU countries tried their own national versions. When Germany, tried it the major newspapers simply granted Google a free license to use their works, because they couldn't afford to be boycotted by the search giant. When Spain passed its own link tax, the government tried to prevent newspapers from following the same path by forcing all news to have its own separate, unwaivable commercial right. Spanish publishers promptly lost 14% of their traffic and €10,000,000/year.

All of this is good reason to scrap Article 11 altogether. The idea that creators can be "protected" by banning them from sharing their works is perverse. If copyright is supposed to protect creators' interests, it should protect all interests, including the interests of people who want their materials shared as widely as possible.

https://www.eff.org/deeplinks/2018/10/eus-link-tax-will-kill-open-access-and-creative-commons-news

A new study published in the peer-reviewed journal Nature Climate Change finds that if Bitcoin is implemented at similar rates at which other technologies have been incorporated, it alone could produce enough emissions to raise global temperatures by 2°C as soon as 2033.

"Bitcoin is a cryptocurrency with heavy hardware requirements, and this obviously translates into large electricity demands," said Randi Rollins, a master's student at the University of Hawaii at Manoa and coauthor of the paper.

Purchasing with bitcoins and several other cryptocurrencies, which are forms of currency that exist digitally through encryption, requires large amounts of electricity. Bitcoin purchases create transactions that are recorded and processed by a group of individuals referred to as miners. Miners group every Bitcoin transaction made during a specific timeframe into a block. Blocks are then added to the chain, which is the public ledger. The verification process by miners, who compete to decipher a computationally demanding proof-of-work in exchange for bitcoins, requires large amounts of electricity.

The electricity requirements of Bitcoin have created considerable difficulties, and extensive online discussion, about where to put the facilities or rings that compute the proof-of-work of Bitcoin. A somewhat less discussed issue is the environmental impacts of producing all that electricity.

A team of UH Manoa researchers analyzed information such as the power efficiency of computers used by Bitcoin mining, the geographic location of the miners who likely computed the Bitcoin, and the CO2 emissions of producing electricity in those countries. Based on the data, the researchers estimated that the use of bitcoins in the year 2017 emitted 69 million metric tons of CO2.

Researchers also studied how other technologies have been adopted by society, and created scenarios to estimate the cumulative emissions of Bitcoin should it grow at the rate that other technologies have been incorporated.

The team found that if Bitcoin is incorporated, even at the slowest rate at which other technologies have been incorporated, its cumulative emissions will be enough to warm the planet above 2°C in just 22 years. If incorporated at the average rate of other technologies, it is closer to 16 years.

"Currently, the emissions from transportation, housing and food are considered the main contributors to ongoing climate change. This research illustrates that Bitcoin should be added to this list," said Katie Taladay, a UH Manoa master's student and coauthor of the paper.

"We cannot predict the future of Bitcoin, but if implemented at a rate even close to the slowest pace at which other technologies have been incorporated, it will spell very bad news for climate change and the people and species impacted by it," said Camilo Mora, associate professor of Geography in the College of Social Sciences at UH Manoa and lead author of the study.

"With the ever-growing devastation created by hazardous climate conditions, humanity is coming to terms with the fact that climate change is as real and personal as it can be," added Mora. "Clearly, any further development of cryptocurrencies should critically aim to reduce electricity demand, if the potentially devastating consequences of 2°C of global warming are to be avoided."

https://phys.org/news/2018-10-bitcoin-global-couple-decades.html

The promise of Tether,  the digital currency pegged 1:1 to the US dollar, was that it could provide the benefits of a cryptocurrency while providing a fiat -backed peg against price fluctuations.

But the currency has fallen below the $1 in recent weeks, right as a range of competing currencies are becoming available to meet the growing interest in the so-called “stablecoin” sector. It’s certainly not a coincidence.

Stablecoins are digital currencies pegged to a stable asset, such as gold or fiat currencies, or backed by collateral (that could also be a cryptocurrency), or even an algorithm that governs the approach to expanding and contracting the money supply. The goal of every stablecoin project is to achieve the scale and adoption of modern monetary systems, as a store of value and also as a medium of exchange.

As we see Tether decline in adoption, opportunities arise for a number of new exchange stablecoins to become the go-to-coin. At the moment, we are seeing a commoditization of the space, and it won’t be until when trading volumes picks back up again when a new (or perhaps the same) Tether arises.

What’s been going on with Tether lately?
Tether (USDT), the largest stablecoin to date, seems to be in a terminal decline following intense scrutiny this year over dubious accounting practices. USDT is a widely tradable stablecoin created by Tether, a company run by the same executives behind the exchange BitFinex. Tether has been criticized for its failure to prove that the reserve has enough US dollar to back its digital currency on a one-to-one ratio, which it promises for its dollar-pegged cryptocurrency.

The pro-USDT narrative has been that despite its failure to provide transparency into its reserves and failing to acquire a proper audit, USDT is still the most widely traded stablecoin with significantly more volume than other stablecoin competitors. It previously compromised over 90% of market cap of all stablecoins and was listed on the most exchanges than any other stablecoin.

Nevertheless, that narrative seems to be breaking in the last 2 weeks. USDT has since seen its market cap go down by almost a third, from its peak of $2.8 billion to $2 billion in the course of 2 months.

In the past, users would purchase USDT via the Bitfinex  platform for two major reasons, which is to buy bitcoin or transfer USD between countries. Given these two major applications, USDT has attracted users both outside and inside the cryptocurrency industry.

Recently, TechCrunch has gathered from investors that believe the price gap developed between Tether and USD is concerning. Because in the traditional markets, one would expect that big players and market makers would be capitalizing on that opportunity and closing the spread.

There have also been claims made by crypto researchers that Tether may be buying up USDT and planning to exit the stablecoin market. This can be driven by increasing scrutiny on the business and that having a stablecoin is no longer sensible and profitable for the company. There are increasingly signs pointing so on Tuesday this week when Tether announced that it has destroyed 500 million worth of USDT from the Tether treasury wallet.

Current stablecoin adoption and real world implementation are still in early stages. Despite more stablecoins getting introduced this year, there have not yet been any set of standards established for the space. If Tether really is winding down its market presence, that means there is room for other coin(s) to rise at least for the existing market demand. But really it’s about stablecoins potentially going mainstream one day

Below is a brief look at the other coins coming on to the market, and what they have done so far.

The rise of the exchange stablecoins
A number of stablecoins have been in existence since 2017 but exchange stablecoins pegged to the dollar have been a big trend in the last few months.

Among the latest movers, crypto exchange Gemini  issued the Gemini Dollar and financial blockchain solution Paxos issued the Paxos Standard. Both coins were approved by the New York Department of Financial Services (NYDFS) last month, which set a precedence for the first regulated, digital representation of the U.S. dollar to be approved in the US. Similar to Tether, both exchanges assert that their stablecoins will be fully backed by a USD reserve. Gemini touts that the balance will be examined monthly by an independent registered public accounting firm to verify the 1:1 peg. Paxos was listed a couple weeks ago on top cryptocurrency exchange Binance.

Unlike non-exchange tied stablecoins, exchange- tied stablecoins enjoy certain benefits by being directly and immediately being put to use when launched. With Tether’s ongoing issue in the last few weeks, we are seeing exchanges either double downing on their own stablecoin, or diversifying to multiple different stablecoins to ensure they can capture majority of the market. Exchanges are incentivized to have their own in-house stablecoin because it allows their customers to turn any of their portfolio tokens trading on the market into stabilized tokens that they can keep as reserve — without having to rush to exchange it into fiat and worry about their portfolio change in value. Once more people hold a common stablecoin, they can transact with each other more easily and the coin could potentially grow adoption that way. This thereby indirectly raises the market cap of the exchange.

In mid-October, other top exchanges also started picking up their adoption and introduction of their own in-house stablecoins. OKEx, one of the top three cryptocurrency exchanges by volume, listed TrueUSD, along with Paxos Standard, Gemini Dollar and Circle’s stablecoin USD Coin. Huobi,  another top ranked exchange by volume, followed with the same listings.

Huobi also listed its own stablecoin solution, called HUSD, which initially is launching by being the stablecoin replacement on its own exchange. And just on Tuesday this week, Coinbase backed Circle in forming the new CENTRE Consortium, and announced the support for USD Coin (USDC).

On the side, we also see numerous existing institutions that have announced and are making way into stablecoins. PWC has started getting into stablecoin advisory through partnerships, while IBM most recently announced its exploration into stablecoins through a collaboration with Stellar by building a stablecoin on the Stellar blockchain.

Which stablecoin could go mainstream?
For the launched tokens, the question now is: can they maintain their stability as their name alludes, and reach the adoption scale that Tether used to dominate?

Success to the public will be the 1) number of exchanges these coins get listed on and their float, 2) the number of transactions and size of transactions committed, and now hopefully 3) ongoing verified amount of reserve.

There are a few early indicators of who is moving ahead, even as many stablecoin projects are still building out their products or are in the process of launching.

Despite recognizing the importance of Tether, the Binance research team has said that they are evaluating almost all the other stablecoins on the market to add to its platform.

Additionally, as reported by Coindesk this last week, HBUS, the U.S. affiliate of the Singapore-based Huobi exchange, have seen both deposits and withdrawals of USDT “increased by over 10x over the last two days,”.

Per the spokesperson: “For deposits, users are transferring their USDT into HBUS from other exchanges to take advantage of our USDT/TUSD trading pair. There has been over a 30% increase in trading on the TUSD/USDT pair over the last two days.”

It is important to note that HBUS still only ranks 129th by adjusted total trading volume according to CoinMarketCap. However, these anecdotes explain how a number of these newer stablecoins broke their one-to-one fiat peg this week, and rose above $1 rather than falling below it. At least it gets some investors excited.

But once a token trades below or above the peg, it misses the whole purpose of stablecoin. It is evident that we are still in the early stage of the market, and over time, the token should stay stable regardless of market conditions, regardless location, and truly weather the most volatile of market times.

As stablecoin is still such a new arena in the cryptocurrency world, one can probably expect further insolvencies or regulatory shocks like what we saw with Tether, but in a lesser magnitude. After all, it certainly is a positive sign that many of these exchange stablecoins are now being regulated and recognized legally, as it is crucial for US-operating crypto companies’ adoption and scaling.

It will be most telling when trading volume returns to the scale of late 2017 to early 2018 time frame. As the market evolves, we may see true differentiation in the space, beyond yet another stablecoin maintaining reserves that are verified by a third party.

https://techcrunch.com/2018/10/25/as-tether-flails-cryptocurrency-exchanges-launch-rival-stablecoins/

Researchers have mapped out a series of internet traffic hijacks and redirections that they say are part of large espionage and intellectual property theft effort by China.

The researchers, Chris Demchak of the United States Naval War College and Yuval Shavitt of the Tel Aviv University in Israel, say in their paper that state-owned China Telecom hijacked and diverted internet traffic going to or passing through the US and Canada to China on a regular basis.

Tel Aviv University researchers built a route tracing system that monitors BGP announcements  and which picks up on patterns suggesting accidental or deliberate hijacks and discovered multiple attacks by China Telecom over the past few years.

In 2016, China Telecom diverted traffic between Canada and Korean government networks to its PoP in Toronto. From there, traffic was forwarded to the China Telecom PoP on the US West Coast and sent to China, and finally delivered to Korea.

Normally, the traffic would take a shorter route, going between Canada, the US and directly to Korea. The traffic hijack lasted for six months, suggesting it was a deliberate attack, Demchak and Shavitt said.

Demchak and Shavitt detailed other traffic hijacks, including one that saw traffic from US locations to a large Anglo-American bank's Milan headquarters being terminated in China, and never delivered to Italy, in 2016.

During 2017, traffic between Scandinavia and Japan, transiting the United States, was also captured by China Telecom, ditto data headed to a mail server operated by a large Thai financial company.

China Telecom is able to divert the traffic by announcing bogus routes via the Border Gateway Protocol (BGP) that governs data flows between Autonomous Systems, the large networks operated by telcos, internet providers and corporations.

After the traffic was copied by China Telecom for encyption breaking and analysis, it was delivered to the intended networks with only small delays. Demchak and Shavitt said.

Such hijacking is difficult to detect as China Telecom has multiple points of presence (PoPs) in North America and Europe that are physically close to the attacked networks, causing almost unnoticeable traffic delivery delays despite the lengthened routes.

China in comparison does not allow overseas telcos to establish PoPs in the country, and has only three gateways into the country, in Beijing, Shanghai and Hong Kong. This isolation protects the country's domestic and transit traffic from foreign hijacking.

BGP hijacking of internet traffic is a common phenomenon, one which requires the support of large network operators to exploit at scale.

While the US and China agreed in 2015 to not hack one another's computer networks, the deal did not cover hijacking of internet backbones, Demchak and Shavitt pointed out.

The researchers suggest the allied democratic nations establish an "access reciprocity" policy for internet PoPs located in their countries, to address the traffic hijacking.

Under the access reciprocity policy US telcos and providers should be allowed to set up PoPs in China, Demchak and Shavitt said.

If access reciprocity is refused, "then an appropriate defence policy in response could state that no traffic to or from the US or ally is allowed to enter a China Telecom PoP in the US or in the ally's networks," the researchers suggested.

Such a policy could be inserted into BGP routing tables as required for automatic implementation.

https://www.itnews.com.au/news/china-systematically-hijacks-internet-traffic-researchers-514537

dow has loss more than 500point this day and nasdaq around 310 points. It is clear that another financial crisis is about to commence and I think bitcoin remains calm is a sign of confidence and strength.

So...  Artem Lobov vs Zubaira Tukhugov would have been a very interesing fight as Lobov is part of McGregor's inner circle while Tukhugov is part of Khabib's.  But Tukhugov was pulled out cos the brawl at 229 as you all already know.  What a shame.

Where do you think this seemingly endless cycle will lead? Will the technology ever solve so many problems and carry so much value that it would destroy the cycle?

TOKYO (Reuters) - Japan’s Financial Services Agency (FSA) on Wednesday gave the cryptocurrency industry self-regulatory status, permitting the Japan Virtual Currency Exchange Association to police and sanction exchanges for any violations.

The government has been reviewing its approach toward an industry that has been hit twice by large-scale thefts.

The FSA approval gives the industry association rights to set rules to safeguard customer assets, prevent money laundering, and give operational guidelines. The association will also have to police compliance.

“It’s a very fast moving industry. It’s better for experts to make rules in a timely manner than bureaucrats do,” a senior FSA official said in a briefing, declining to be named.

Similar officially sanctioned bodies exist in industries such as securities brokerages.

“We will make further efforts to build an industry that is trusted by customers,” the cryptocurrency industry association said in a statement following the FSA approval.

Japan last year became the first country to regulate cryptocurrency exchanges, as it encourages technological innovation while ensuring consumer protection. Exchanges have to register with FSA.

Both the regulator and the industry were criticized after about $60 million was stolen from cryptocurrency firm Tech Bureau Corp in September. Before the incident, the company was slapped with two business improvement orders by FSA following the theft of $530 million in digital coins at Tokyo-based cryptocurrency exchange Coincheck Inc in January.

Some FSA officials said the crypto industry now needs heavier regulatory approach, while not wanting to stifle its growth.

Yuri Suzuki, senior partner at law firm Atsumi & Sakai, said the self-regulatory body’s rules are stricter than the current law and she expects them to help the industry to regain public trust.

At the same time, “the self-regulatory body’s workload is likely to be heavy and there is an issue of whether it can secure enough staff with expertise in crypto exchange business,” said Suzuki, who closely follows crypto industry regulation at home and overseas.

FSA on Wednesday also published a set of guidelines for those applying to run crypto exchange. The agency said there are about 160 entities expressed interest.

There are 16 approved crypto exchanges. FSA has not granted any new approval since December last year. “We are looking into more details than before. In that sense, the approval process has become more strict,” the FSA official said.

https://www.reuters.com/article/us-japan-cryptocurrency/japan-grants-cryptocurrency-industry-self-regulatory-status-idUSKCN1MY10W

There was some good, but mostly bad news in Deutsche Bank's Q3 earnings report.

The good news is that after years of turmoil, the biggest German bank is showing signs of stabilization under new CEO Christian Sewing after a bitter boardroom battle. The bad news is that the bank missed across all key revenue metrics as Sewing scrambles with a looming problem: how to boost revenue after firing thousands of banks in a multi-year long cost-cutting campaign.

The German bank reported net income of €229 million on Wednesday, above the €160 million expected but 65% below the €649 million reported a year ago. Profit before tax also tumbled by nearly half, dropping from €933 million to €506 million.

Investors were closely watching the bank's costs: the new management team, which was appointed last April, promised to deliver further cost-cutting to revamp the balance sheet. In the third quarter of 2018, the bank said that adjusted costs dropped 1% from a year ago to 5.5 billion euros, with the aim for the full year to bring adjusted costs down to €23 billion and €22 billion in 2019. A core part of the new "restructuring" effort have been mass layoffs as the number of workers is set to come down to 93,000 by the end of 2018, and 90,000 one year later.

But while costs and the bottom line beat were a modest positive surprise, the same could not be said for the bank's revenue which disappointed across the board: total revenue of €6.17BN missed expectations of €6.34BN and guided lower, now predicting a slight decline for full year revenue after earlier guiding for a flat result; trading income in the key FICC division tumbled 15% from a year earlier, while equities trading, a sector where Wall Street banks generally posted gains, also dropped at the same pace as these two key businesses have been hardest-hit by executives departures recently.

More Q3 revenue details:

• FICC revenue: €1.32BN vs €1.545BN in Q3 2017, and missing expectations of €1.365BN
• Equities trading revenue: €466BN vs €548BN in Q3 2017, and missing expectations of  Exp. €473BN
• Total sales and trading revenue: €1.79BN, missing expectations of €1.84BN
• Total revenue: €6.17BN, missing expectations of €6.34BN

In total, Deutsche reported its lowest third-quarter revenue since 2010 and now expects a slight decline for the full year, after earlier guiding for a flat result according to Bloomberg.

The silver lining is that while revenue was a disappointment, costs also shrank which should allow the bank to post its first annual profit in four years according to Sewing who added that the focus now has to be on growing the top line without compromising controls: "With profit before tax of 506 million euros, this result is another milestone on our way to becoming a sustainably profitable bank. We have our costs under control and sufficient capital to grow. We are on track to be profitable in 2018, for the first time since 2014."

Of course, being profitable by butting into the muscle is hardly what shareholders expected, and the CEO admitted as much writing in a memo to employees that while “we made headway on our cost reductions," he admitted that "we have not yet achieved a turnaround in terms of revenues."

As Bloomberg notes, for investors who have been through the bank’s previous turnaround plans, "it’s a familiar pattern." John Cryan, Sewing’s predecessor, had vowed to restore “controlled growth” last year after raising fresh funding, but failed to deliver. Sure enough, the stock was promptly punished for this latest disappointment, with Deutsche Bank shares falling 3.5%, having lost 44% of its value this year and trades near its record low.

Sellside reactions were mixed, with JPM analyst Kian Abouhossein writing that Deutsche Bank "has done an excellent job under Sewing" on cost reductions and improving the bank’s capital strength, however “we remain concerned about DB’s inability to turn around” the investment bank division."

On the other hand, Goldman analyst Jernej Omahen was more critical, writing that the third quarter results were “weak” from an operational perspective, noting underperformance relative to U.S. peers in investment bank revenue progression, as well as the underlying pretax profit miss. The silver lining: capital was better-then-expected, as was bottom line, due to lower burden of non-operating items.

But the one recurring theme was the lack of top-line growth: "Costs are in line with targets,” said Daniel Regli, an analyst with MainFirst who has a hold recommendation on the stock. “But there is continued weakness in investment bank revenue. That needs to be fixed.”

* * *

Sewing had staked his restructuring effort, and Deutsche's fourth in three years, on boosting profitability by trimming costs and refocusing on fewer, core activities. Yet the continued contraction in the top line risks undermining investor confidence in the strategy and may fuel speculation that the lender needs to combine with a rival in the long run, BBG adds.

The new CEO has vowed the investment banks will remain a core business for Deutsche Bank, with at least half of the revenue coming from the unit. And yet, he’s cutting at least 7,000 jobs and retrenching in areas such as prime finance, U.S. rates and corporate finance in the U.S. and Asia. The bank cut another 700 positions in the third quarter after eliminating about 1,700 jobs in the three months through June; it said it remains on track to hit its job target of well below 90,000 by end of 2019.

The bank's steady exodus of employees has left the business stuck in what CFO James von Moltke called a "vicious circle" of declining revenue, “sticky” expenses, a lowered credit rating and rising funding costs. Additionally, the bank on Wednesday highlighted higher funding costs and geopolitical events among the headwinds for the securities unit.

Meanwhile, as the one-time financial titan continues to shrink, all management can do is try to boost morale: Garth Ritchie, head of the bank's securities unit urged employees in a memo to “focus resolutely on rebuilding revenue momentum” in the final quarter; surely a preferable alternative to being fired. Von Moltke said on a conference call that the bank wants to redeploy excess cash to return to growth, as restructuring expenses are likely to be lower than previously expected. He said rating companies would be comfortable with such use of capital.

“We need to end the year on a strong note,” Sewing wrote in his memo. “We’ll stay disciplined on costs, and we’ll turn around revenues.”

https://www.zerohedge.com/news/2018-10-24/deutsche-shares-tumble-after-net-income-plunges-65-lowest-revenue-8-years

Money laundering is a multi-bank phenomenon. Danske Bank Estonia has been revealed as the hub of a $234bn money laundering scheme involving Russian and Eastern European customers. But Danske Bank Estonia couldn’t do this by itself. Much of the money was paid in U.S. dollars, and for that, it needed help from other banks. Banks that had access to Fedwire, the Federal Reserve's electronic settlement system. Big banks, in other words.

The entrance to Danske Bank's headquarter at Holmens Kanal in Copenhagen, Denmark. Danske Bank admits that it has been used to launder money from companies related to Russia. Transactions valued at $234 billion flowed through its small branch in Estonia between 2007 and 2015, a large part of which are believed to have been illicit. (Photo by Ole Jensen/Getty Images)

It appears that four big banks helped Danske Bank Estonia make its dodgy transactions. J.P. Morgan, Bank of America and Deutsche Bank AG all made dollar transfers on behalf of the Estonian branch’s non-resident customers. And according to the Wall Street Journal, Citigroup’s Moscow branch may have been involved in some financial transfers in and out of Danske Bank Estonia. But how much responsibility do these banks bear for these transfers? Could they reasonably have been expected to know – or suspect - that the money was dirty?

Banks that make transactions on behalf of other banks are known as “correspondent banks”. In the past, correspondent banks often had little information about the originator or final recipient of the money they were transmitting. They simply trusted that their customer bank was acting legally and that its customers were above board. Old habits die very hard: in 2016, the correspondent banks involved in the FIFA corruption case, which include Citigroup, HSBC, Wells Fargo and Barclays, all claimed that they could not have known that the transfers were corrupt.

But these days, banks are expected to “know their customers’ customers”. They are supposed to conduct their own checks to make sure that they are not unwittingly being used to launder dirty money.

In the case of Danske Bank Estonia, one of the correspondent banks did suspect something was wrong. In 2013, J.P. Morgan terminated its correspondent banking relationship with Danske Bank Estonia because it was concerned that it was being used as a conduit for dodgy funds. Deutsche Bank, however, blithely continued to make U.S. dollar wire transfers on behalf of the Estonia branch’s non-resident customers after J.P. Morgan's departure. So did Bank of America, which replaced J.P. Morgan.

From 2014 onward, according to Bloomberg, Deutsche Bank started refusing to make transfers that looked particularly dodgy. But the transaction flow did not fall off dramatically until 2015, when Bank of America and Deutsche Bank both terminated their correspondent bank relationships with Danske Bank Estonia - Bank of America in May, and Deutsche Bank in September. A report from the Danish Financial Supervisory Authority (FSA) – Danske Bank’s regulator – says that an employee at one of these banks warned about the Estonian branch’s suspicious customers:

In that connection, a senior employee from the correspondent bank in question assessed that out of ten non-resident customers from the Estonian branch, the correspondent bank would be comfortable only with servicing one given the customers’ characteristics. The employee also warned Danske Bank against Moldovan customers and customers transferring money to Moldova.

According to the Financial Times, this was a Deutsche Bank employee.

But if Deutsche Bank employees were so aware of the suspicious nature of Danske Bank Estonia’s customers and the dodgy nature of some of the money flows, why didn't Deutsche Bank follow J.P. Morgan's example in 2013? Why was it the last to terminate its correspondent bank relationship?

At that time, Deutsche Bank was happily doing a spot of Russian money laundering itself – the “mirror trades” through its Moscow branch for which it last year paid fines totaling $630m to U.S. and U.K. regulators. I suppose it is entirely understandable that a bank that was actively laundering money for its own customers might be little concerned about money laundering by one of its customer banks. But this raises serious concerns about the adequacy of Deutsche Bank's AML processes - concerns that, as we shall see, refuse to go away.

The U.S. regulators are already sniffing round Danske Bank. If the FIFA investigation is anything to go by, their interest will not be limited to the Danish bank. They will also want to know what the correspondent banks thought they were doing. Deutsche Bank was the only correspondent bank to stay with Danske Bank Estonia throughout the period of its known money laundering, and it apparently continued the relationship despite knowing that the Estonian branch’s customers and transactions were suspicious. U.S. regulators might take a dim view of Deutsche’s behavior, especially given the $41m fine it was handed by the Federal Reserve in May 2017 for inadequate AML controls, and the “Problem Bank” designation awarded to its American subsidiary by FDIC.

It seems that BaFIN, the German regulator, thinks so too. Two days after Danske Bank released a report revealing the mammoth scale of its Estonian branch’s money laundering activities, BaFIN reprimanded Deutsche Bank for inadequate AML processes, and imposed an external supervisor to ensure it improved them. The notice on BaFIN’s website is short and to the point:

On 21 September 2018, in order to prevent money laundering and terrorist financing, BaFin ordered that Deutsche Bank AG take appropriate internal safeguards and comply with general due diligence obligations. The issued order is based on section 51 (2) sentence 1 of the German Money Laundering Act (Geldwäschegesetz – GwG).

To monitor the implementation of the ordered measures, BaFin has appointed a special representative in accordance with section 45c (1) in conjunction with section 45c (2) no. 6 of the German Banking Act(Kreditwesengesetz – KWG). The special representative is to report on and assess the progress of the implementation.

Ostensibly, this follows on from Deutsche Bank’s admission in August 2018 that its AML processes were patchy to say the least. But the timing is exquisite. Could BaFIN be warning off the U.S. regulators? “This baby is ours. We will deal with it.”

Whether or not BaFIN’s reprimand is directly connected with the money laundering revelations, the fact remains that Deutsche Bank has some serious questions to answer regarding its conduct during the period of its correspondent relationship with Danske Bank Estonia.

And so too do the other banks involved. Although their correspondent relationships were of shorter duration, both J.P. Morgan and Bank of America helped to facilitate the enormous dollar flows in and out of Danske Bank Estonia. And although the exact role of Citigroup’s Moscow branch is as yet unclear, the little we know about it sounds suspiciously like Deutsche Bank’s “mirror trades”.

Investigations into the Estonian money laundering scandal are only just beginning. There is much, much more still to be uncovered. But already, an all-too-familiar familiar name has emerged. Funny, isn’t it, how whenever there is some shady activity going on, Deutsche Bank is never far away?

https://www.forbes.com/sites/francescoppola/2018/09/30/the-banks-that-helped-danske-bank-estonia-launder-russian-money/