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Marie Huillet

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Coinbase and Gemini reportedly had their accounts approved with JPMorgan Chase in April.

JPMorgan Chase, the United States’ largest bank, has reportedly taken on U.S. cryptocurrency exchanges Coinbase and Gemini as customers.

A report from the Wall Street Journal on May 12 cited unnamed sources apparently familiar with the matter, who highlighted that the move is the first time the banking giant has served clients from the crypto industry.

Both exchange accounts were reportedly accepted in April, with transactions now starting to be processed, sources told the WSJ.

JPMorgan Chase is not processing Bitcoin (BTC) or other cryptocurrency transactions on behalf of the exchanges but is providing cash-management services and handling dollar transactions for their U.S.-based clients. The bank will reportedly process all wire transfers and dollar deposits and withdrawals via the Automated Clearing House network.

Coinbase and Gemini are notably regulated

The sources have claimed that both exchanges were asked to undergo a rigorous vetting process, pointing to major banks’ long-standing reluctance to forge relationships with crypto-related businesses.

Coinbase and Gemini have both established themselves as thoroughly-regulated entities; the latter, owned by the Winklevoss twins, has previously drawn criticisms from diehard libertarian cryptocurrency advocates for its controversial 2019 “crypto needs rules” ad campaign.

This April, Gemini obtained a new security qualification, a Service Organization Control (SOC) 1 Type 1 certification, after passing a review by Big Four accounting firm Deloitte.

Coinbase Custody had, for its part, previously sealed both an SOC 1 Type 2 and a SOC 2 Type 2 evaluation by major accounting firm Grant Thornton.

Coinbase is registered as a money services business with the Financial Crimes Enforcement Network and Gemini obtained a trust charter from New York’s Department of Financial Services back in 2015.

Both exchanges have also satisfied the requirements to operate under NYDFS’ exacting BitLicense framework and are licensed money transmitters in multiple states.

JPMorgan’s Jamie Dimon has been a vocal Bitcoin critic
For those who have followed JPMorgan chairman and CEO Jamie Dimon’s stance toward the crypto space in recent years, news of the bank’s pathbreaking support for both exchanges may be somewhat surprising.

Among his spicier statements, Dimon has said that Bitcoin is “worse than tulip bulbs,” predicting that speculation on the coin “won’t end well.”

The bank has been positive about blockchain’s potential, however, and announced plans to issue its own settlement-focused digital currency, JPM Coin, in mid-February 2019.

Recently, the bank has reportedly been considering a merger of its in-house blockchain unit Quorum — which underlies its Interbank Information Network — with the well-known Ethereum-focused firm ConsenSys.

Author: Marie Huillet

Source: Coin Telegraph: JPMorgan Provides Banking Services to Crypto Exchanges Coinbase and Gemini

Niklas Nikolajsen, the founder of Swiss crypto broker Bitcoin Suisse, predicts that Bitcoin (BTC) will move to Proof-of-Stake (PoS) once the Ethereum (ETH) network has proved the algorithm’s success.

Bitcoin’s current Proof-of-Work (PoW) consensus algorithm — the pioneering concept which in fact pre-existed Bitcoin, but has since come to be indissociable from the cryptocurrency — “will probably change in the future,” Nikolajsen argued.

In outtakes from an interview conducted for a German TV documentary — recorded back in October 2019, but uploaded on April 6 — Nikolajsen said:

“[Bitcoin’s move to Proof-of-Stake] is not planned, but the second-largest cryptocurrency, Ether, will move to a Proof-of-Stake concept that demands vastly less electricity, already in a few months. I’m sure, once the technology is proven, that Bitcoin will adapt to it as well.”

“Once it’s proven that Proof-of-Stake works well, it’s a superior system to Proof-of-Work,” he said.

What’s at stake?

In blockchains that use a PoS system, nodes in the network engage in validating blocks, rather than mining them, as in PoW. For PoS, a deterministic algorithm selects block validators based on the number of tokens a given node has staked in their wallet — i.e. deposited as collateral in order to compete to add the next block to the chain.

Nikolajsen’s prediction that Bitcoin will eventually migrate to a PoS system was made in the context of a discussion of the notoriously high levels of electricity needed to sustain mining on the current network.

He dismissed claims that mining Bitcoin consumes levels of electricity comparable to small nations and also emphasized that mining’s energy-intensity is less of an issue than where that energy is produced and how sustainably it is generated.

Moreover, the energy consumption of producing gold — Bitcoin’s proverbial predecessor — must be equally acknowledged, Nikolajsen states, as does that in the existing banking system and tech industry:

“Which metropolis in the world doesn’t have 100-story-high banking towers, glowing in a million different colors all night, and their financial systems, their computers, server rooms. How much energy does Facebook consume? They have 21 huge data centers worldwide, I’d say probably more than Bitcoin. The banking system for sure consumes a lot more energy.”

Algorithms go head-to-head

The common perception that high energy consumption is an “Achilles Heel” for Bitcoin has been critiqued by some proponents of clean energy, who, like Nikolajsen, place an emphasis on the sources of power, rather than levels of consumption.

Beyond the energy problem, the PoS vs. PoW debate engages questions of economic fairness, barriers to entry, network security and decentralization.

Author: Marie Huillet

Source: Coin Telegraph: Bitcoin Will Follow Ethereum And Move to Proof-of-Stake, Says Bitcoin Suisse Founder

Leading blockchain intelligence firm Chainalysis has found that the COVID-19 pandemic and global economic contraction is affecting Bitcoin (BTC) consumer habits in surprising ways.

In a new report published on March 30, Chainalysis details how Bitcoin spending trends in three areas — merchant services, gambling and darknet marketplaces — have changed, or even reversed.

Weakening correlation could be a boon for Bitcoin merchant services, says report

Chainalysis reported that one such change in trend shows resilience among Bitcoin merchant services in the current economic crisis.

For example, the firm’s data for Bitcoin spending using merchant services from July 2019 until March 9, 2020 reveals that there was a strong positive correlation between price and expenditure: the more Bitcoin is worth, the more likely holders are to spend it.

Since the COVID-19 outbreak, this positive correlation has weakened by roughly half, and the total value of expenditure has declined.

While this indicates that Bitcoin holders are indeed spending less during Bitcoin’s recent decline in value, this decrease is less dramatic than might otherwise have been expected. This is because since the outbreak, the strength of the correlation between price and behavior has itself also weakened.

So while Bitcoin’s decline in price does continue to lead to reduced spending — it does not do so as significantly as it would have done in pre-pandemic times. A weakened correlation means that the price does is not dictating consumer behavior as strongly as before.

Bitcoin usage, 7 July 2019— 27 March 2020. Source: Chainalysis blog

Darknet marketplaces take a hit

Most conspicuous of all is the change in user behavior on darknet marketplaces, which usually has only a weak negative correlation to Bitcoin’s price. Since the outbreak, however, this correlation has reversed and strengthened — leading to a significant decrease in darknet market revenue.

Chainalysis points to possible external factors to explain this trend, noting that illicit substances such as recreational drugs may be harder to come by due to the impact of disrupted supply chains worldwide:

Recent reports point out that Mexican drug cartels are having a harder time sourcing fentanyl, as China’s Hubei province — a hub of the global fentanyl trade — has been hit hard as the epicenter of the outbreak. Such disruptions […] could be hampering darknet market vendors’ ability to do business.”

With gambling, its marginally positive correlation to Bitcoin price has corrected to zero since early March 2020 (i.e. no relationship), signaling that there appears to be no discernable impact of the pandemic on gamblers’ behavior.

Chainalysis closes its report noting that with China’s gradual comeback from the domestic COVID-19 crisis, darknet activity now appears to be seeing a gradual recovery there.

In January 2020, a Chainalysis report revealed that the volume of cryptocurrency flows on darknet markets had doubled in 2019 for the first time in four years.

Author: Marie Huillet

Source: Coin Telegraph: Pandemic Is Changing Bitcoin Usage in ‘Unexpected Ways,’ Says Chainalysis

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