UK regulatory authorities have started looking into the impact of digital assets on the country’s economy, with the view to regulating the crypto ecosystem in a way that will be advantageous to all stakeholders.

Regulation that Supports Innovation

According to Investment Week, the investigation will study the effect of virtual currencies and blockchain technology on financial institutions as well as other areas of the economy.

The inquiry will also carefully formulate guidelines that will protect businesses and consumers without “Stifling innovation.”

The exercise will also cross-examine the regulatory stance of the government and key authorities like the Financial Conduct Authority (FCA) and the Bank of England.

Nicky Morgan MP, chair of Treasury Committee said, “People are becoming increasingly aware of cryptocurrencies such as Bitcoin, but they may not be aware they are currently unregulated in the UK, and there is no protection for individual investors.”

She also noted that:

“Striking the right balance between regulating digital currencies to provide adequate protection for consumers and businesses, whilst not stifling innovation, is crucial. As part of the inquiry, we will explore how this can be achieved.”

Cryptocurrency is a Double-Edged Sword

MP Alison McGovern, a member of the Treasury committee, opined that the government needs more enlightenment on crypto because as bitcoin and other digital assets offer great gains to investors, there is also a substantial level of risk involved.

In her words:

“This inquiry comes at the right time, as regulators and governments wrestle with recent events in cryptocurrency markets. New technology offers the economy potential gains, but as recently demonstrated, it may also bring substantial risks. It’s time that Whitehall and Westminster understood cryptocurrency better and thought more clearly about the policy environment for blockchain technology.”

Regulation is Inevitable

While the chairperson of the Treasury committee and some members are on the same page concerning the fair regulation of the blockchain ecosystem, some other officials see cryptocurrency as a distraction that needs to be taken care of as fast as possible.

Regulation Counsel at law firm Ashurst Lorraine Johnston reiterated that the inquiry, “Signals yet another step towards the what-seems-like inevitable regulation of digital currencies,” adding that, “Yet again the conflicting interests of supporting innovation versus consumer protection are being put under scrutiny, this time by the Treasury. But surely this is a crypto-conundrum that no country has yet solved adequately? I wouldn’t, however, bet against some form of quasi-regulation of digital currencies coming out of this.”

Meanwhile, the CEO of BrokerNotes, a trading comparison site, Marcus Taylor, is of the opinion that the virtual currency market is a distraction:

“The cryptocurrency market is, quite frankly, a distraction. Until we move beyond viewing cryptocurrencies purely as a tradable asset, to understanding the different applications of the underlying technology and the potential to make cryptocurrencies a viable alternative to fiat currency, it’s going to be difficult to make any meaningful progress.”

He also stated, “The UK has a great opportunity to embrace blockchain technology and lead the way in building innovations that can help the UK economy. The is inevitable with or without government intervention. However, with the right level of regulation, funding and support the government can certainly make things happen faster.”

A fair regulation of the crypto market is a step in the right direction as trying to stifle the growth of the virtual currency ecosystem might be met with stiff resistance from the masses, just as it happened in South Korea, where the Justice Minister was petitioned for initiating a ban on virtual currencies.

Bitcoin and altcoins are slowly but steadily becoming a part of life especially for the younger generations and blockchain technology only make the crypto revolution a more achievable feat.

The post U.K Government Set to Create Favorable Regulations for Cryptocurrency appeared first on CryptoVila.

Faster, cheaper bitcoin transactions? Check. But at what cost?

For bitcoin users, many of whom were drawn to cryptocurrency for its promise of financial sovereignty, bitcoin is still synonymous with privacy. But the gap between the vision and the reality, in which user transactions today must be published to a globally distributed ledger, has long been one of the technology’s biggest points of controversy.

“Bitcoin is Twitter for your bank account. Everything is public to everyone,” Ian Miers, the co-founder of the privacy-centric cryptocurrency zcash, told CoinDesk.

Compounding matters, however, is that as bitcoin users get closer to gaining a whole new way to send transactions, powered by an innovation called the Lighting Network, concerns are spreading that privacy could degrade from its already imperfect state.

On the surface, the idea might seem promising – because Lightning payments occur “off-chain,” the information isn’t included in the blockchain that all nodes store.

But while there is no Lightning ledger so to speak, payments in the scheme are still broadcast across nodes within the network. Essentially, to ensure routing is always available, those using Lightning channels need to trust other network users to help relay transactions.

Conceptually, this means that participants within the system could pry on a transaction, or even potentially sell that information to governments or advertisers. This is a risk that’s worsened if the network becomes centralized into a “hub-and-spoke” type structure, where hubs are large, well-known and often-used entities.

“Lightning likely won’t improve privacy, it may make it much worse from an average consumer’s perspective,” Miers added.

And like many, more speculative concerns surrounding the upcoming tech, the risk to user privacy may not be obvious until the network is deployed – an uncertainty that, combined with a wave of efforts on behalf of Lightning developers to include privacy features, has led to mixed sentiments as to what the future of private bitcoin transactions might be.

According to privacy researcher Kristov Atlas, in a worst-case scenario, privacy attackers could “thrive” on hubs “vampirically feeding off” the data as he wrote in a blog post.

However, the upcoming Lightning release does have some privacy features embedded, and there’s reason to believe that developers are at least making advances on the problem.

Onion-routing

To date, the most advanced privacy feature included within Lightning is called “onion routing,” and it’s part of the Basics of Lightning Technology (BOLT), a series of protocols that ensure the multiple iterations of Lightning can interoperate.

In onion routing, payments are passed through multiple channels, and only the minimum of information about that payment is exposed.

For instance, upon receiving an encrypted payment, a node can only know where that payment came from and to what node that payment should be relayed.

According to Olaoluwa Osuntokun, a leading figure in Lightning development who first suggested the scheme on the developer mailing list, the importance of this is that nodes can’t be selective when it comes to what payments they’re willing to take.

“Nodes shouldn’t be able to arbitrarily censor certain payments, or blacklist certain destinations within the channel graph,” Osuntokun explained.

Often compared to the Tor network for its use of onion routing, Lightning has occasionally been celebrated as a darknet for bitcoin payments – however, it’s comparatively untested, and could face some of the problems native to Tor as well.

“Similar to Tor, there exist known possibilities of timing leaks, and also unknown active attacks that may be viable,” Osuntokun said.

And according to some, there’s ways that onion-routing could be manipulated, leading to the loss of privacy, especially in an early Lightning network.

For example, the last node within a route, as well as whoever sent that payment, will know the transaction information, and theoretically, nodes could collude to break privacy, piecing together each layer of the payment in order to create a complete picture.

On top of this, there’s the risk of a “global adversary which is able to instantaneous monitor all channels on the network,” something that the current privacy protocol doesn’t address, Osuntokun continued.

Fixed identifiers

And there’s further defects to privacy on Lightning today as well.

For example, Lightning payments are currently given a fixed identifier that is repeated throughout the entire route. “This means that if an adversary has two non-contiguous nodes on the route, then they can trivially link a payment flow,” Osuntokun said.

That said, Osuntokun assured that there’s ways to correct this in future.

For example, if Schnorr signatures, a scaling method that works by aggregating public keys, are adopted into bitcoin, it could correct this issue in a “simple and attractive” way, Osuntokun said.

Plus, there’s other, “more heavy weight solutions” such as using zero-knowledge to encrypt payments. However, because this encryption device is heavy, it will “significantly increase the amount of data one needs to send in order to complete a payment,” Osuntokun said.

According to Osuntokun, the “lowest hanging fruit” is to obscure this payment identifier with random numbers as the payments pass through the network.

Hub and spoke

Even more speculative risks exist as well, but according to Miers, it’s all highly contingent on the structure that the Lightning network will take.

“Some people think the amount of money you need to lock up in a channel and the costs of running nodes will inevitably lead to centralization,” Miers said. “And then there’s clearly no privacy.”

Because onion routing works by passing payments through multiple nodes, in the case of a highly centralized network, active nodes could have perfect visibility of the payments.

However, Blocksteam engineer Christian Decker told CoinDesk that the development teams are  creating “counter measures” against this risk of centralization.

Programming the system to open channels at random, Lightning “tries to avoid having hubs that can observe traffic,” Decker explained, which has the added benefit of “strengthen[ing] the network as a whole against single points of failure.”

Decker said that this randomness could be extended to how routes are formed on the network, making payment paths less predictable but potentiality increasing fees.

Other researchers maintain the risk involved in maintaining a node with high throughput will stave off the formation of centralized hubs.

Miers concluded:

“We will see which one actually ends up happening.”

The post Will Lightning Help or Hurt Bitcoin Privacy? appeared first on CryptoVila.

The current whirlwind of hard forks such as Bitcoin Gold, Bitcoin Diamond, Bitcoin Cash and others have worsened the confusion about the very idea of Bitcoin and thus harming it in many ways.

It is believed that many projects are unduly exploiting the liberal MIT open license which underpins Bitcoin’s core code to attack the blockchain network. Hence, confusing the public in order to gain personal profit in a way which is seriously hurting the Bitcoin ecosystem.

However, these exploitations may have a provided a trigger to look for new approaches to shield Bitcoin‘s core code from being abused.

What is the MIT License?

The MIT License (also known as the X11 license or MIT X license) is a permissive free software license that was originally developed at the Massachusetts Institute of Technology. Therefore, when an author makes the software accessible under the MIT License, they give the authorization to utilize, share and modify the product at no extra cost.

Proposed Changes

The new proposal, which has been recommended on a mailing list for Bitcoin developers maintained by the Linux Foundation, includes the inclusion of a wording on the MIT License that would make it difficult for subsequent forks to profit off Bitcoin’s brand.

In particular, the proposed changes disallows the use of any name associated with Bitcoin in any new project for marketing purpose, except it is compatible with the Bitcoin’s core blockchain.

Jose Femenias Canuelo wrote on February 13:

“…I’d like to raise the possibility of amending the MIT license in a simple way, by adding a line such as:

***
NO PART OF THIS SOFTWARE CAN BE INCLUDED IN ANY OTHER PROJECT THAT USES THE NAME BITCOIN AS PART OF ITS NAME AND/OR ITS MARKETING MATERIAL UNLESS THE SOFTWARE PRODUCED BY THAT PROJECT IS FULLY COMPATIBLE WITH THE BITCOIN (CORE) BLOCKCHAIN
***

(This is just an approximation. A final version would probably have to include a restriction to some soundalikes like BITKOIN, BIITCOIN,…).”

Mixed Views on The New Proposal

Developers in support of this new change believe that reusing Bitcoin’s license by other forks is an attack on Bitcoin.

For instance, Aymeric Vitte – a bitcoin-dev list contributor – highlighted major issues associated with reusing the cryptocurrency’s core code such as the Replay Attack, referring to the duplication of transactions that may occur on forked chains as well as Bitcoin’s original blockchain:

“Maybe people like to get ‘free’ coins, but they are misleaded (sic), they can lose everything, and there are some more vicious side effects, like replay protection collisions between forks.”

Other developers, such as Felix Wolfsteler, are opposed to the change partly because there are few issues with the solution. First of all, the ownership of Bitcoin’s core software is not clear. For example, the MIT Digital Currency Initiative which is maintained by a group of developers provides funding for development cost. Hence, it would be difficult for someone to assert possession and sue another individual for using the software.

Additionally, the MIT Licence which is widely used in open source software projects to encourage innovation and collaboration might discourage further innovations on Bitcoin’s blockchain, if there are changes to its licensing.

The post Amendment of Bitcoin’s Open License Proposed to Dampen Fork Mania appeared first on CryptoVila.

The weekly Technical Analysis, published every Wednesday, is provided by Dmitriy Gurkovskiy, Chief Analyst at RoboForex.

Needless to say, all statements and views expressed below and any forecasts contained herein are based on the authors’ particular opinion.

This analysis may not be treated as trading advice. RoboForex and Trustnodes bears no responsibility for trading results based on trading recommendations and reviews contained herein.

Bitcoin

Bitcoin price managed to break out the long term descending channel resistance and went into the projection channel. This breakout enabled forming an uptrend, and, by now, the price is just a bit short of $12,000, still unable to hit it.

Currently, the short term ascending channel support is being tested, and in case this attempt is successful, the price may hit the lower projection channel target at $10,000. Then, the price may fall step by step till $9,000, which is the support.

A wild downward breakout is also possible, as well as a mid-term downtrend, and if this is the case the price may well hit the lower support at $5,000.

Ethereum

Ether is trading within the same descending channel as before, but is now experiencing a pullback upwards. The price is heading towards the resistance, which lies at the important round number of $1,000.

In the short term, the local trend may have changed, as the support of the uptrend channel has been broken out, and the price has fallen into the projection channel, heading down to $815.

After this target has been tested, the price may fall further till $700. The overall trend is still descending, its target being as low as $300.

Bitcoin Cash

Bitcoin Cash went above the long term descending channel resistance, which allowed it to enter the upper projection channel and outlined a new short term ascending trend. The target of the latter may be around $1,800, which is the mid-term channel resistance.

Speaking short term, the price is breaking out the ascending channel support, with the closest target at $1,200. This is exactly the level determining the next trend phase, with many things depending on the market’s reaction to it.

With the support at $1,200 broken, the price may well hit the low at $400, but, if this is the case, it will probably happen in around a few weeks. If, on the contrary, the price bounces off $1,200 upwards, this will mean a new bullish impulse.

Litecoin

Litecoin has probably gained more momentum than many other cryptocurrencies out there. The primary descending channel resistance has been broken out, and the price has headed into the second projection channel.

The market is currently uptrending, while the support of the new projection channel is being tested. The most likely scenario is bouncing off the support and rise to the resistance at $305. Conversely, if the local support at $208 is broken out, the projection channel at $160 may be hit.

Ripple

Like many other digital coins, Ripple has entered the ascending pullback phase by breaking out the previous descending channel resistance. The main target within the current projection channel is probably its resistance at $1.54.

The current status quo shows Ripple is likely to start trading sideways, within the support and resistance of $0.85 and $1.22, respectively.

The market expects the resistance to get broken out and the uptrend to continue, while if the support is hit, the price may well fall to $0.60 and then to $0.35.

The post The Outlook Appears Bleak According to This Week’s Crypto Technical Analysis appeared first on CryptoVila.

Bitcoin Price Key Highlights

• Bitcoin price is still in correction mode but appears to be bouncing off the trend line support.
• Applying the Fibonacci extension tool shows how high price could go if the trend line holds.
• Technical indicators are signaling that the uptrend is about to resume.

Bitcoin price is finding support at the area of interest on the trend line, 200 SMA, and $10,000 mark so the rally might resume from here.

Technical Indicators Signals

The 100 SMA is above the longer-term 200 SMA on this time frame so the path of least resistance is to the upside. This means that the rally is more likely to resume than to reverse. Also, the 200 SMA lines up with the rising trend line connecting the latest lows.

Stochastic is pulling up from oversold levels to signal that bullish pressure is returning. Similarly, RSI is also turning higher to show that buyers are ready to jump back in.

A bit of bullish divergence can be seen on stochastic as the oscillator formed higher lows while price had lower lows. A bounce could take bitcoin price up to the 38.2% extension around $11,000 or the 50% extension at the swing highs.

The 61.8% extension is located at $12,000 or another long-term area of interest. The 76.4% extension is at $12,788 then the full extension is at $13,590.

Market Factors

The US dollar enjoyed another wave higher on hawkish FOMC minutes and risk aversion. Policymakers agreed that stronger growth momentum could warrant further tightening in the months ahead.

This led to higher bond yields and another weak close for US equities as business and consumer activity could be dampened by higher interest rates. Note that bitcoin price has been trading alongside stocks and commodities, so the dip also affected the cryptocurrency.

Nonetheless, it’s still worth noting that bitcoin sentiment has improved after a few nations have expressed the need to keep the door open for industry developments. Then again, some top financial officials have made negative remarks on bitcoin, particularly on its ability to be a store of value.

The post Bitcoin Price Technical Analysis for 02/22/2018 – Potential Bounce Targets appeared first on CryptoVila.

The Israel Tax Authority (ITA) recently announced that Bitcoins and cryptocurrencies, in general, would be treated and taxed as property and not as an asset. On February 19th, the ITA through a professional circular declared, “Bitcoin is an asset and not a currency.”

The above mentioned circular read,

“For purposes of income tax….. a person whose activity as aforesaid does not reach a business is only entitled to capital gains tax and the person whose activity in the field reaches a business (trade in a distributed method of payment and Such a measure), tax will be paid for any business activity.” 

Israel is going forward with a two-pronged approach when it comes to taxing cryptocurrencies. The tax slab is going to be divided into two categories. The first one includes people who hold these virtual currencies in order to gain profits, i.e, create a capital gain and the second one includes businesses (or individuals) which ‘engage’ in Bitcoin for ‘business’ purposes.

The people in the first category will be liable to pay a capital gains tax, which currently is at 25% in Israel. The people in the second category will have to pay 17% as value added tax (VAT) in addition to the 25% as capital gains tax. Hence, a businessman engaging in cryptocurrencies to carry out business activities could potentially have to pay 42% as taxes.

Chairman of the Israeli Bitcoin Association, Manny Rosenfeld commented,

“The digital currency revolution is here to stay……. Tax Authority has made several amendments to the circular in accordance with the positions we presented.”

David Lewinson, a cryptocurrency trader from Israel commented,

“This decision by the government has both pros and cons. The pros being that this decision shows that cryptocurrencies are legitimate currencies and will instill confidence in the investors and the cons being that such a high rate will result in lower number of blockchain startups and will possibly result in locals shifting to other countries with friendlier tax laws to start their business.”

Gwen Wayne, an accountant from the US says,

“Profit from Bitcoin and other altcoins should be taxed just as profit from other trades is. How is it any different? At the end of the day, capital gains is taxable and so is cryptocurrencies.”

An interview with a couple of business owners in Tel Aviv and Jerusalem have had mixed reactions where everyone is happy about the acceptance of cryptocurrencies in Israel but unhappy with the 42% tax bracket on cryptocurrencies. Sources from within the ITA say they would like to discourage the use of cryptocurrencies but would not want to ban it considering the adoption and use cases in various industries.

The post Endangered species protection finds blockchain and Bitcoin love appeared first on CryptoVila.

The Israel Tax Authority (ITA) recently announced that Bitcoins and cryptocurrencies, in general, would be treated and taxed as property and not as an asset. On February 19th, the ITA through a professional circular declared, “Bitcoin is an asset and not a currency.”

The above mentioned circular read,

“For purposes of income tax….. a person whose activity as aforesaid does not reach a business is only entitled to capital gains tax and the person whose activity in the field reaches a business (trade in a distributed method of payment and Such a measure), tax will be paid for any business activity.” 

Israel is going forward with a two-pronged approach when it comes to taxing cryptocurrencies. The tax slab is going to be divided into two categories. The first one includes people who hold these virtual currencies in order to gain profits, i.e, create a capital gain and the second one includes businesses (or individuals) which ‘engage’ in Bitcoin for ‘business’ purposes.

The people in the first category will be liable to pay a capital gains tax, which currently is at 25% in Israel. The people in the second category will have to pay 17% as value added tax (VAT) in addition to the 25% as capital gains tax. Hence, a businessman engaging in cryptocurrencies to carry out business activities could potentially have to pay 42% as taxes.

Chairman of the Israeli Bitcoin Association, Manny Rosenfeld commented,

“The digital currency revolution is here to stay……. Tax Authority has made several amendments to the circular in accordance with the positions we presented.”

David Lewinson, a cryptocurrency trader from Israel commented,

“This decision by the government has both pros and cons. The pros being that this decision shows that cryptocurrencies are legitimate currencies and will instill confidence in the investors and the cons being that such a high rate will result in lower number of blockchain startups and will possibly result in locals shifting to other countries with friendlier tax laws to start their business.”

Gwen Wayne, an accountant from the US says,

“Profit from Bitcoin and other altcoins should be taxed just as profit from other trades is. How is it any different? At the end of the day, capital gains is taxable and so is cryptocurrencies.”

An interview with a couple of business owners in Tel Aviv and Jerusalem have had mixed reactions where everyone is happy about the acceptance of cryptocurrencies in Israel but unhappy with the 42% tax bracket on cryptocurrencies. Sources from within the ITA say they would like to discourage the use of cryptocurrencies but would not want to ban it considering the adoption and use cases in various industries.

The post Bitcoin considered Property in Israel – businesses accepting crypto to pay heavily appeared first on CryptoVila.

Public consultations on a new regulatory regime for crypto companies in Italy are now closed. Interested parties were invited by the Ministry of Economy and Finance to share suggestions and comments on a draft decree introducing registration and reporting requirements in the sector. The new set of rules will come into force within 3 months of adoption.

Italy Trying to Understand the Phenomenon

The ministerial decree has been designed to “explore and understand the various aspects of the virtual currency phenomenon”. The legal document, aimed at implementing Italy’s updated and “strengthened” anti-money laundering laws, was published by MEF’s Treasury Department on February 2. Interested parties had two weeks to express their opinions and suggest amendments.

In May 2017 the Italian government issued another decree requiring “service providers related to the use of virtual currency”, like exchanges, to fulfil their obligations to prevent money laundering and illicit crypto transactions. The new document introduces additional responsibilities for crypto businesses. They will have to report regularly their activities to the Finance Ministry.

The text of the proposed decree clarifies that although cryptocurrency is used as a “means of exchange for the purchase of goods and services”, it is not issued by a central bank or other public authority. The embedded disclaimer also states that cryptos are “not necessarily connected to a currency that is a legal tender”.

Exchanges and Merchants to Register and Report

The new notification regime will also be applicable to commercial companies accepting cryptocurrency payments for goods, services and utilities. The Ministry wants to conduct a “systematic survey” starting with determining the number of operators in the sector. Upon commencing activity, every company should register with the Italian Agency of Intermediaries OAM in order to operate legally in the country.

The Department of the Treasury has already completed a preliminary evaluation of the technical specifications for the register, the Ministry of Finance said in a press release. The new regulatory regime is to be launched within 3 months after the decree enters into force. Its implementation responds to the need to understand the new phenomenon and its dimensions, said Roberto Ciciani, Head of the General Directorate for Prevention of Financial Crimes.

Regulators point out that the revised Italian legal framework will comply with the latest EU Anti-Money Laundering Directive – 5MLD, which introduces stricter rules to prevent financial crimes. The previous directive was adopted in Italy on May 25 last year.

The use of bitcoin and other cryptocurrencies by individuals remains largely unregulated in Italy. However, a law requiring identification of parties in crypto transactions has been introduced in the parliament. In 2016 the Italian tax authority Agenzia delle Entrate stated that cryptocurrency purchases and sales are exempt from VAT. With some limitations, personal crypto holdings and gains from transactions do not generate taxable income.

Do you think the new requirements for Italian companies to register and report will lead to more restrictions or to legalization of the crypto sector? Tell us in the comments section below.

Images courtesy of Shutterstock, Twitter.

At Bitcoin.com there’s a bunch of free helpful services. For instance, have you seen our Tools page? You can even lookup the exchange rate for a transaction in the past. Or calculate the value of your current holdings. Or create a paper wallet. And much more.

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The post Italy Completes Consultations on Registration of Crypto Companies appeared first on CryptoVila.