Capital Controls Installed in Argentina Highlight the Prowess of Bitcoin

Amidst a turbulent 365-day period during which the Argentine fiat currency – the Peso (ARS) – has lost over half of its value against the U.S. dollar, the country has announced the enforcement of new capital control measures, limiting citizens’ and businesses’ freedom to buy foreign currency.

The decision has been made most likely to encourage more people to use digital currency, particularly the Bitcoin to bypass the restrictions as they have done in other nations.

On Sunday, the central bank imposed restrictions on businesses following a decline of over 25% in the value of the peso since local elections last month. The government’s decision comes after the BCRA lost $3 billion in reserves late last week. An official announcement read:

“Given diverse factors that affected the evolution of the Argentine economy and the uncertainty caused in the financial markets, the [government] considered it necessary to adopt a series of extraordinary measures aimed at assuring the normal working of the economy, sustain the level of [economic] activity and employment, and to protect consumers.”

The president of Argentina Mauricio Macri recently signed a bill that introduced limitations on foreign currency purchases. According to the new measures, large exporters will be required to obtain permission from the central bank of Argentina to buy foreign currency and transfer it abroad.

In addition to that, companies as well as banks must seek authorization to sell ARS for foreign currency, and individuals will not be allowed to buy over $10,000 per month. This measure will be in effect until December 31st, 2019.

In August, Argentine peso and government bonds collapsed amidst the crushing defeat of incumbent President Mauricio Macri in the primary. At some point, on local exchanges Bitcoin was trading $300 higher than the average market price.

Meanwhile, a further decline in the peso threatens hyperinflation, which will certainly force many citizens to look for alternative ways to save money. Cryptocurrency may serve the need in this situation.

The new capital control measures represent an improvement from older laws which required a purchase limit for individuals of $2,000. It also removes a hurdle that required individuals to present to the country’s revenue service (AFIP), evidence to justify their income before they can buy dollars.

Whilst Argentineans are now legally barred from purchasing above $10,000 monthly, Bitcoin does not place a cap on the number of units that anyone can hold. Additionally, there is no limit to the amount that can be transacted within a particular time frame.

Argentinians could look towards China for solutions on subverting state capital controls. The Chinese are still big on Bitcoin despite every effort from the government to quash it. Peer to peer trading has increased there and it appears to be on the rise in Argentina also.

According to data on localbitcoins volume for the Argentine peso has surged this year. It peaked in July topping $15 million for the week and has been high in August at over $12 million.

Either way, the latest capital control measures have highlighted Bitcoin’s strength and raised hope that soon, more than a few Argentines will consider the cryptocurrency as a ‘safe-haven asset’ amidst the growing economic uncertainties.

Alan Howard Behind the $1 Billion Crypto Hedge Fund

Elwood Asset Management, a UK-based investment firm owned and founded by hedge-fund billionaire Alan Howard, is planning to launch a $1 billion venture in the cryptocurrency hedge fund space, according to a report published by The Financial Times on August 30th.

Elwood Chief Executive Officer Bin Ren disclosed to the Financial Times that the firm was working on a platform that would tailor portfolios of cryptocurrency funds for institutional investors.

According to the report, the new platform aims to address the volatility and security risks often associated with the crypto hedge funds. CEO Ren claimed that the objective was to provide investors with a selection group of vetted crypto funds have passed robust due diligence so that market participants can avoid “blow outs.”

Whilst the details of the new venture have yet to be finalized, it is noted that the platform would allow investors to specify their terms such as the risk level they are willing to take, the returns they expect, as well as their liquidity terms. In addition to that, it will also determine the potential correlation with other assets owned by the investors. As a result, investors will get portfolios specifically tailored to their needs.

Besides the fees the investors need to pay to access the underlying funds, they would also have to pay a certain fee to Elwood for using the new platform.

“I see this as a very big growth opportunity,” Ren said, adding that the new platform-style product could ultimately manage over $1 billion of assets.

Meanwhile, Elwood has been screening crypto hedge funds and has already identified up to 50 that “probably satisfy our due diligence.”

The new platform builds on Elwood’s previous work in the crypto space. Earlier this year, the investment firm launched the Elwood Blockchain Global Equity Index. The index, which is calculated by index provider Solactive AG, stimulates investment into both crypto and blockchain projects.

Elwood had also indicated it was planning to increase its cryptocurrency offerings as it announced the launch of a blockchain exchange-traded fund in partnership with Invesco, which would be listed on the London Stock Exchange.

Last month, Invesco Japan launched the Japanese domestic ‘Invesco Global Blockchain Equity Fund’, offering Japanese investors exposure to digital assets and blockchain technology. The fund will track the performance of the Elwood Blockchain Global Equity Index.

Prior to this, there had been other reports that also suggested Elwood was planning to launch a range of cryptocurrency products targeting institutional investors. Moreover, Alan Howard himself has a host of crypto investments under his belt, including in EOS developer Block.one as well as the ICE-owned digital assets platform Bakkt.

The new venture follows other billion-dollar-plus investments in the space. For reference, Telegram’s blockchain, TON, which is expected to be released in the coming months, raised over $1.7 billion.

US Agency Blacklists Several Cryptocurrency Addresses Under the Kingpin Act

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has issued an advisory to alert financial institutions of drug trafficking financial schemes. The agency sanctioned three Chinese nationals and their cryptocurrency addresses, alleging they manufactured and distributed “synthetic opioids or their precursor chemicals.”

According to an updated Specially Designated Nationals (SDN) list on August 21st, the US Treasury has added multiple cryptocurrency addresses under the Foreign Narcotics Kingpin Designation Act, also known as the Kingpin Act. These addresses as well as the individuals associated with them, have been deemed to be associated with foreign narcotics operators.

Respectively, the three alleged narcotic operators associated with these addresses are Chinese citizens Xiaobing Yan, Fujing Zheng and Guanghua Zheng. The Chinese nationals all have associated Bitcoin (BTC) addresses mentioned on the SDN list. Guanghua Zheng has in addition to that a Litecoin (LTC) address.

According to OFAC, the individuals are known to be significant foreign narcotics traffickers, who laundered part of their drug proceeds in BTC, sending these proceeds in and out of banks in China and Hong Kong.

In addition to naming the three individuals, OFAC listed Qinsheng Pharmaceutical Technology Co. Ltd. and the Zheng Drug Trafficking Organization in Wednesday’s update.

Sigal Mandelker, Under Secretary for Terrorism and Financial Intelligence stated:

“The Chinese kingpins that OFAC designated today run an international drug trafficking operation that manufactures and sells lethal narcotics, directly contributing to the crisis of opioid addiction, overdoses, and death in the United States.  Zheng and Yan have shipped hundreds of packages of synthetic opioids to the U.S., targeting customers through online advertising and sales, and using commercial mail carriers to smuggle their drugs into the United States.”

Mandelkar further stated that the agency has coordinated with the Financial Crimes Enforcement Network (FinCEN) as well as other local law enforcement agencies.

Under the Foreign Narcotics Kingpin Designation Act, the agency has taken measures against the three Chinese national by freezing any property they own within the U.S. and listing a number of email aliases, citizen numbers and passport information belonging to them.

Following the law, individuals who violate the Kingpin Act might face civil penalties of a $1.1 million fine per violation, in addition to possible criminal penalties of a $5 million fine and up to 30 years in prison.

This marks the second time that the US Treasury has sanctioned cryptocurrency addresses. In November 2018, the department blacklisted two bitcoin addresses associated with an Iranian ransomware scheme.

Coinbase Completes Acquisition of Crypto Custodian Xapo

Coinbase, one of the largest cryptocurrency exchanges, has just acquired the custody business of Xapo, an institutional business service best known for storing Bitcoins (BTC) in a vault under a Swiss mountain. The acquisition follows Coinbase’s plans to expand its custody services, and could eventually lead to the San Francisco – based exchange storing over 5% of all Bitcoins in circulation.

According to an announcement made on Thursday, Xapo has been acquired for $55 million which was enough to outbid another strong contender – custody giant Fidelity. The firm stated that the new acquisition will help expand the company’s custody business as well as increase the assets under custody up to more than $7 billion.

The news follows weeks of speculation over the exchange’s intentions with Xapo, seeing as Coinbase Custody had acquired in early August Xapo’s largest client – crypto-asset manager Grayscale Investments who at the time reported having $2.7 billion under management. This is considered to be one of the largest crypto transactions in history.

Xapo, which launched in 2013, is known for its wallet services including physical storage vaults for Bitcoin, based in Switzerland, which are used to store customers’ crypto assets in an offline environment to ensure the safety of private keys. Prior to Grayscale being acquired by Coinbase, the firm reportedly held $5.5 billion worth of cryptocurrency.

Following the acquisition, Xapo will hold onto its exchange business, which lets ordinary consumers buy and sell Bitcoin. Xapo founder, Wences Casares, has stated that he will maintain his long-time role of CEO. In addition to that, Xapo will keep possession of the vault and use it to store Bitcoins on behalf of its retail customers.

According to Casares the retail exchange business has always been Xapo’s main focus, and the custody business had been established as a side business at a time when wealthy Bitcoin investors needed a secure place to park their digital wealth.

 “In choosing Coinbase, we are confident that the Institutional Custody Business is going to a company that can provide great insurance, borrowing and investment alternatives,” said Casares. “We believe that Coinbase will take this opportunity to prove to our customers that they deserve their business.”

Meanwhile, the majority of Xapo’s largest clients have agreed to transfer their assets to Coinbase, giving the company control of over 514,000 BTC, currently worth $5.3 billion. If Coinbase manages to sign the remaining clients, then its custody service will have more than 860,000 bitcoin in total under custody, worth over $8 billion.

Coinbase CEO Brian Armstrong, has stated that ”custody is a critical step toward the institutionalization of crypto economy. It’s likely to start off small—maybe a few billion under custody—but it will grow quickly to a point that it’s a meaningful piece of stable, recurring revenue for the company.”

Prior to the acquisition in July this year, Coinbase Custody claimed to hold more than $2.5 billion worth of crypto from roughly 100 institutional clients.

Coinbase’s new custody services will include regulatory support and insurance, as well as staking, which extends to a sort of proxy voting service for cryptocurrencies that have built-in voting mechanisms.

“Fundamentally, we have to help our investors earn a return on their assets. You can imagine lending out Bitcoin and earning interest on that,” said Coinbase Custody CEO Sam McIngvale.

In the meantime, Coinbase isn’t the only company trying to get into the custody space. Earlier this year, startup Anchorage announced $40 million in backing from finance giant Visa as it seeks to lure in more institutional clients. Meanwhile, Palo Alto-based BitGo is also said to be competing to be a player in the custody space.

Coinbase Switches Banks from Barclays to ClearBank in the UK

Barclays – the British multinational investment bank and financial services company – has reportedly ended their relationship with U.S. cryptocurrency exchange platform Coinbase.

According to industry sources, the London – based bank, is no longer providing banking services to Coinbase ending a relationship that started in March last year as the exchange expanded in Europe.

The news has caused unwarranted disruption, such as Coinbase users having reportedly been indirectly affected. The rare deal between the exchange and the bank gave its UK customers access to the Faster Payments Scheme (FPS) which allowed users to directly deposit and withdraw pounds into their exchange accounts.

However, the news of the split up has already slowed UK deposits and withdrawals, which now take days to process. The US exchange platform has already found a replacement UK banking partner in ClearBank.

ClearBank is one of the U.K. challenger banks that have come up on the radar in recent years to compete with market incumbents. ClearBank is expected to restore Coinbase’s FPS access by the end of the third quarter.

The reasons for the separation of Barclays and Coinbase are not clear. Currently, Barclays, ClearBank and Coinbase have all declined to comment on the matter.

However, one unnamed source claimed that the Barclays-Coinbase relationship was simply a pilot program that had run its course. The source further added that Barclays has probably held Coinbase back, preventing it from listing certain coins and tokens.

A CEO of a U.K. crypto company who chose to remain nameless has also voiced his opinion on the saying, citing:

“It is my understanding that Barclays’ risk appetite has contracted a little – I’m not sure exactly why or what’s been driving that, maybe there has been some activity they are not happy with. But it’s about Barclays’ comfort level with crypto as a whole.”

Coinbase first secured a bank account with Barclays in early 2018 and by August it already began rolling out support to let UK customers buy and sell cryptocurrency in Pounds sterling. The exchange had also been granted an e-money license by the U.K. Financial Conduct Authority (FCA), making it to be the first crypto platform to gain access to FPS.

Meanwhile, earlier this week, Coinbase delisted Zcash – a privacy-centric cryptocurrency, which uses a technology called zero-knowledge proofs to hide details of transactions from blockchain watchers. According to sources, the decision was made in accordance with Clearbank’s wishes, as it was uncomfortable indirectly supporting a currency with features that make law enforcement’s job harder.

ClearBank is also working with FCA-regulated crypto broker BCB Group. Most recently, the broker announced a deal to bring Luxembourg-based exchange BitStamp onto Faster Payments for the sterling pound.

Although, Barclays has taken the decision to take less risks when it comes to crypto, the global bank still provides operational banking services to Blockchain, the U.K. wallet provider which recently announced plans to move into the exchange space with its super-fast PIT trading service.