The Chain: a phantom launch, Bitcoin heists and new plans from Rakuten
Asia Times' new daily column on developments from the blockchain and crypto 'space'
The global hype around crypto-currencies remains, it seems, as strong as ever. Take an event in Cambodia last night (March 7). The Asean Blockchain Summit, held in Phnom Penh, was being billed in media across the world as the launch event for a Cambodian national crypto-currency. That is a big deal. Only Venezuela has a national crypto and it has just been declared illegal by the country’s national assembly.
In Cambodia, the government was quick to deny the claims made and, as reported by the Phnom Penh Post, the event’s organisers – Entapay – had almost no profile before it announced its ‘Summit.’ Nor did the attendees, or supporting organizations. The event itself was carried out almost entirely in Mandarin and filled by people from China, some of whom said they had no real interest in crypto-currencies. And no national crypto-currency got launched. Confused?
The Big Bitcoin Heist
The Cambodian story, unusual as it maybe, tells us nothing really new. In an event-filled, decade-long life history, these enigmatic digital coins have always struggled to shake off associations with fraud, subterfuge and, especially, criminality.
First came Bitcoin’s reputation as the currency of choice for dark web terrorists, drug dealers and other global entrepreneurs with questionable ethics. Then came the accusations around money laundering, ponzi schemes and “pump and dump” market manipulation, followed by a host of multi-million dollar exchange hacks.
There are old-fashioned heists too these days. Since the crypto market started seeing regular 1000+% rises there have been cases of masked bad guys simply pointing guns and forcing their poor victims to hand over – or, to be more accurate, transfer – their crypto-riches.
And now we are seeing something else. In Iceland, there has just been what local media is calling “the Big Bitcoin Heist,” where thieves targeted not virtual coins but 600 “mining” severs.
Iceland’s volcanic landscape means cheap and plentiful geothermal and hydroelectric energy and this – together with the fact that China, up until now the site of the world’s biggest mines, is said to be about to outlaw bitcoin mining – has seen it become a bitcoin “mining” centre. A similar theft was also reported in Malaysia last month.
Icelandic police say they hope to find the missing servers by looking for energy-usage spikes and say the thefts seem to have been carried out by an organized crime gang.
Iceland has always been proud of its famously low crime rate. That was until Bitcoin came to town.
Another day, another crypto scam
Onto another crypto crime. This one works via scammers posing as celebrities on Twitter and pretending to give away crypto-cash.
The “celebrities” ask people to send them a small amount of crypto-currency to qualify for the giveaway, but… wait for it… no crypto-currency is ever sent back in return.
This week an account posing as Elon Musk used the username @elonmuskik to send a tweet announcing that the billionaire engineer-entrepreneur was “giving away” 3,000 Ether tokens, worth about US$2.4 million. The message was retweeted by a network of automated bot accounts and stayed live for many hours before being suspended.
Many celebrities have been targeted, including Twitter-loving Donald Trump. “Hi guys!” read a scam message pretending to be from the US President. “Because I’m the best President ever I’m donating 250 Ethereum to the ETH community!”.
ETH is the crypto-currency Ethereum, and its founder Vitalik Buterin has been subjected to scams so many times that he has changed his Twitter username to “No I’m not giving away ETH”.
The US tightens the noose
The long list of frauds touched on above are why the US Securities and Exchange Commission (SEC) has repeatedly voiced concern about crypto-currencies and ICOs. Yesterday it made perhaps its toughest proclamation yet by saying all crypto-currency trading platforms have to be registered and regulated.
The SEC said in its statement that these platforms are “potentially unlawful” and the news, unsurprisingly, bought all crypto-currency prices falling. The SEC cited concerns that “many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not” and after the announcement Bitcoin dropped nearly 10%, falling below US$10,000. What comes next?
One feasible outcome for the future of crypto and blockchain is that the split will continue. The sector is already rapidly dividing between industry-focused blockchain-only projects and crypto-currency ones. But we are seeing a crypto split too, between crypto tokens that serve as stand-alone currencies and ones that are more “asset based.”
Take Japanese e-commerce giant Rakuten and its plans to launch a new crypto-currency called Rakuten Coin.
Rakuten might be calling its coin a “borderless currency” but the real story is that it will synch it with the company’s existing global loyalty program, Rakuten Super Points, and this will encourage customers to purchase different company services and goods using the digital tokens.
What makes this really interesting is that Rakuten – often called “the Japanese Amazon” – has just announced it is building its own mobile wireless network and has said it plans to use its horde of consumer-habit data to grow, yes indeed, its loyalty program.
Rakuten announced its global-player intentions when it became the first worldwide sponsor of FC Barcelona in a 2017 deal worth US$250 million. Its multi-continent loyalty program is already worth US$9 billion and Rakuten is now linking this with a crypto coin and a big data gathering network.
This can only get more interesting.