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Bertelsmann has invested in the second fund of Berlin’s Greenfield One, a crypto venture firm with earlier bets on NEAR, Arweave and others.

SC Ventures, the innovation and ventures arm of Standard Chartered, has partnered with Northern Trust, to launch a crypto custody business.

Dubbed Zodia Custody, the new business will launch in London, according to an announcement late Tuesday. Zodia is expected to begin operations next year, pending registration with the U.K. Financial Conduct Authority and other regulatory conditions.

The news confirms previous reports which said SC Ventures is building a crypto custody solution for institutional investors. At the time, Northern Trust’s participation wasn’t known.

At launch, Zodia will provide custody services for bitcoin (BTC) and ether (ETH), and then support more cryptocurrencies in the future, including XRP, litecoin (LTC), and bitcoin cash (BCH), per the announcement.

“The introduction of digital custody backed by the know-how and experience of global banks is a breakthrough in the evolution and support of institutional cryptocurrency markets,” said Pete Cherecwich, president of corporate and institutional services at Northern Trust. “Zodia’s robust capabilities will make it possible for institutional asset owners, family offices and asset managers to invest in a range of cryptocurrencies as interest continues to grow in these emerging and innovative financial instruments.”

Crypto trading as well?

A new report from CoinDesk on Tuesday said that Standard Chartered is also launching a crypto trading service for institutional investors.

Citing “two sources familiar with the plan,” the report said that the bank is working with a group of crypto exchanges and over-the-counter trading desks for the new offering. These are said to include LMAX and ErisX. Standard Chartered will reportedly make the first test trade next month.

The bank is said to be also building an ERC-20 settlement token for its crypto trading platform. “We are building our own token of fiat collateral and hoping that will become the equivalent of Tether, except that the tokenized collateral or money will be held in the trading bank account of a proper bank, like a Standard Chartered, a JPMorgan, a Deutsche Bank,” one of the two sources told CoinDesk.

A number of established financial institutions and banks have been looking into offering crypto services, including JPMorgan, DBS, and BBVA. The overall trend suggests that giants that once shied away from crypto are now embracing the nascent industry.

© 2020 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

A shared payments infrastructure initiated by the state and joined by major Indian banks, the United Payments Interface (UPI) accounted for over 2.2 billion transactions in November.

Police authorities in Seoul have reportedly brought charges against crypto exchange Coinbit’s chairman and two unnamed executives, according to the South Korean news company Newspim. 

The country’s prosecutors are preparing a case against the executives, claiming they engaged in market manipulation. From August 2019 to May 2020, police allege the executives used a ghost account to blow up transaction volume and alter coin prices, per the report.

This fraud earned the executives around 100 billion won ($84 million) in wash trading profit. Wash trading is a form of market manipulation whereby an investor buys and sells the same financial asset at the same time to make the marketplace appear more active than it is. Around 99% of Coinbit’s volume transactions were allegedly conducted in the name of wash trading, according to Seoul Shinmun. 

The South Korean authorities reportedly seized and searched the Coinbit headquarters in Gangnam-gu, Seoul, on August 26 to investigate the company after learning about potential fraud.

© 2020 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• After years of flying under the radar, crypto mixing services now seem to have the attention of financial policymakers.
• Exchanges may turn to analytics tools to flag when customers deposit funds that have been mixed.

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this Daily feature on The Block.

The bitcoin market dipped again Tuesday while traders have scooped up ether options at the $1,120 price level.

One of Ethereum’s most popular software wallets, MyEtherWallet, is giving users access to Ethereum 2.0 staking.

France is set to implement stringent new measures for the country’s cryptocurrency sector, The Block has learned.

The French Finance Ministry is preparing to not only harden know-your-customer (KYC) rules for crypto firms but also regulate crypto-to-crypto transactions, according to Simon Polrot, president of French crypto association ADAN.

Polrot told The Block in an interview that he had been informed by the ministry of the proposed measures because ADAN is “a trusted interlocutor” on crypto-related matters.

Overall, several ministries were involved in crypto discussions, said Polrot, including the Ministry of Internal Affairs and the Prime Minister’s Cabinet.

Two additional sources — Nicolas Louvet, CEO of Coinhouse Group, and Pierre-Guy Bareges, CTO of Digital Service Group — confirmed to The Block about the proposed measures. Coinhouse provides crypto trading and custody services in France and is registered by the country’s financial markets regulator, the AMF. Digital Service Group is the operator of French crypto exchange Zebitex, and it is currently undergoing a licensing process with the AMF.

Both Louvet and Bareges said in separate interviews that they were informed of the upcoming measures by the French government.

The Finance Ministry did not respond to The Block’s request for comment by press time.

Why stricter rules?

The main reason for the proposed stricter measures are the recent terrorist attacks on France, these sources told The Block.

Two weeks before the attacks, i.e., in September, French police had arrested 29 people suspected of funding Islamist extremists in Syria using cryptocurrency.

“What happened is one of [the] wannabe digital assets services providers (DASP) (or PSAN in French) let some people using the services to send money abroad, especially in Turkey and Syria, and then faced investigation from security services,” Bareges told The Block. “Then the police ran an operation arresting those people and said that bitcoin was used to finance terrorism, and then the finance minister declared we need to control crypto much better.”

In October, France’s Finance Minister Bruno Le Maire said on national television that the country would make proposals “to strengthen the control of financial funds” because “cryptocurrencies pose a real problem of terrorist financing.”

Polrot characterized the moves as “political positioning.”

“The government had to react and take a stance and to do something to explain that they are doing something to fight terrorism,” he told The Block.

KYC measures

As for the first proposed measure, the Finance Ministry is set to publish a decree later this week — likely Wednesday or Thursday — which will mandate full KYC for all crypto transactions, including crypto-to-crypto transactions, Polrot, Louvet, and Bareges, all told The Block.

A decree is the rule of law in France, and does not go through any parliamentary approval processes.

The full KYC of all crypto transactions means all crypto exchanges and other firms will have to verify their customers, irrespective of transaction size.

In other words, all crypto transactions worth more than €0 will have to go through full KYC processes and require two forms of government identification (ID). The current limit for KYC checks is €1,000, and at present it applies only to crypto-to-fiat transactions.

Including crypto-to-crypto transactions for the KYC rules is “harsher than other jurisdictions,” said Polrot. 

Louvet and Bareges echoed these sentiments, adding that this KYC measure would lead to higher compliance costs as well as more friction when it comes to onboarding users.

Currently, the cost of onboarding a user is around €1, said Bareges, and in light of the proposed measures, that cost could shoot up to €5. “And you’re not sure whether that user will make a volume that will cover those costs,” Bareges said.

Bareges went on to say that the KYC measure is a “concern for all actors in France” because customers could go to foreign exchanges where constraints are much less restrictive.

To be sure, any rules announced will apply to crypto firms that are based in France and those firms that actively target residents of France, per the country’s laws. 

Moreover, the full KYC measure will also remove the benefit of “occasional” crypto transactions, or one-off transactions worth €1,000 or less, allowed to carry without KYC.

“It’s a shame,” Louvet told The Block. “From a user experience point of view, we won’t be able to offer a nice experience to someone to make one small or two small transactions without the full KYC […] but that’s not a gamer changer in terms of business, because if my only customers were people making transactions of €100, I wouldn’t do this business.”

Mandatory registration for crypto-to-crypto exchanges

The other major proposed rule change is a mandatory registration for crypto-to-crypto exchanges, Louvet, Bareges, and Polrot all told The Block.

Currently, in France, the mandatory registration rule is only for crypto-fiat exchanges and crypto custodians. These two types of firms have until December 18 to get their licenses, as previously reported, or else they face fines and possible imprisonment.

But with only ten days remaining for the deadline, “a lot of service providers are very anxious,” said Polrot, referring to whether the firms will get their licenses by the deadline. He claimed that around 30 crypto firms are awaiting results. The situation is similar to the U.K., as The Block reported recently.

As for this proposed measure, crypto-to-crypto exchanges could receive a six-month period during which they would have to comply, said Polrot and Louvet.

The scope of this measure is also not clear currently, Polrot said, meaning it remains to be seen whether global crypto exchanges operating in France will also be brought under this rule.

The tangible impact isn’t exactly clear, either. According to The Block Research, trade volumes for the country’s exchange ecosystem are relatively small compared to their industry peers. 

Volume data is publicly available only for two exchanges — Paymium and Zebitex — and these exchanges have a combined volume of about $40 million since the start of 2020.

Source: CryptoCompare, The Block Research 

Polrot said most of France’s trading volume takes place on crypto brokerages, such as Coinhouse.

Coinhouse’s Louvet did not reveal specific numbers but he said the firm’s revenue had grown 2.5 times from the last year. Still, volumes this year aren’t at the same level as those seen during the 2017-2018 crypto market boom, he said.

This post has been updated for clarity.

© 2020 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Michael Saylor announced plans to offer convertible bonds with the express intent to buy BTC. The community reacts.

Researchers have found a previously unknown way to execute a denial-of-service attack on a proof-of-work blockchain system.

The researchers, from Cornell Tech and the Technion Israel Institute of Technology, described the attack, which they call blockchain denial of service (BDoS) in a new academic paper they presented on October 20 at the 2020 ACM SIGSAC Conference on Computer and Communications Security.

They say that a BDoS is the first type blockchain attack that “exploits the reward mechanism to discourage miner participation.”

Traditional DoS attacks tend to target the web servers of organizations like banks, media companies, or internet infrastructure providers. The attacker bombards the servers with spam traffic, overloading it and making it unable to serve legitimate requests. 

But a DoS attack is more difficult against a decentralized network. According to the authors, a DoS attack has never been successfully executed against a prominent cryptocurrency system.

Before the new research, it was thought this would require that the attacker obtain at least 51% of the network’s mining capacity. According to the researchers, the BDoS attack they’ve discovered would theoretically be able to “grind (Bitcoin’s) blockchain to a halt with significantly fewer resources” — as little as 21% of the network’s mining power (as of March 2020).

The attack works by targeting the system’s reward system in a way that discourages miner participation. Specifically, the attacker publishes a proof to the blockchain that signals to other miners that the attacker holds a mining advantage.

The researchers found that what they define as “rational” miners will stop mining if they detect that they are at a disadvantage. “If the profitability decrease is significant enough so that all miners stop mining, the attacker can stop mining too,” they write. “The blockchain thus grinds to  a complete halt.”

The study authors add: “We find that Bitcoin’s vulnerability to BDoS increases rapidly as the mining industry matures and profitability drops.” 

According to Ittay Eyal, a senior lecturer at Technion who co-authored the study, BDoS attacks are different from a type of attack called selfish mining, in which the attacker manipulates the system to get more than their fair share of rewards. In a BDoS attack, the attacker’s aim is to take down a proof-of-work cryptocurrency rather than reap rewards.  

Eyal said the findings of the study pertain specifically to Bitcoin, but that’ it’s likely there are similar attacks against Ethereum. The researchers have not gathered any concrete results on this yet, he said. 

They are also trying to continue characterizing the BDoS attack. “We still have many open questions,” said Eyal. “What’s the minimum possible cost for an attack? What kind of mitigations are there?”

© 2020 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.