BTC Sessions - BitMEX Charged, Coinbase Avoids Politics, ECB Euro Coin EP103

Episode Date: October 2, 2020

SUPPORT THE SHOW: LEDN offers Bitcoin backed loans – Sign up and get $50 free https://bit.ly/3cWJQ5M Get Wasabi wallet and enjoy your Bitcoin privacy https://wasabiwallet.io/ Buy a Cobo Vault to secure your Bitcoin! https://bit.ly/2GgMFlH Cobo Vault Tutorial: https://www.youtube.com/watch?v=JnRjvZKulrA Crypto Cloaks: Get the BEST Bitcoin swag out there https://www.cryptocloaks.com/shop/ If you value my work and would like to send me a tip, they are always appreciated! LIGHTNING tips: https://tippin.me/@BTCsessions Join my Telegram channel! https://t.me/btc_sessions SHOW RESOURCES: BitMEX charged by SEC/DOJ https://bravenewcoin.com/insights/bitmex-founder-arrested-for-violation-of-us-money-laundering-laws https://decrypt.co/43787/420-million-bitcoin-flees-bitmex-federal-charges https://cointelegraph.com/news/bitmex-denies-cftc-and-doj-allegations-says-trading-will-continue KIK token was illegal security https://www.coindesk.com/kik-sec-ruling Coinbase says it’s not political, Jack Dorsey claps back https://blog.coinbase.com/coinbase-is-a-mission-focused-company-af882df8804 https://www.coindesk.com/twitters-dorsey-calls-out-coinbase-ceo-for-ignoring-users-societal-issues Coinbase to give UK tax records https://www.coindesk.com/twitters-dorsey-calls-out-coinbase-ceo-for-ignoring-users-societal-issues ECB leans towards Euro coin https://decrypt.co/43665/ecb-says-it-must-be-prepared-to-issue-digital-euro-2

Wasabi wallet and fairly private. What's up everyone? I'm Ben with the BTC sessions and this is your daily session. Before we dive in, I want to give a shout out to sponsors of the show, leaden.io. This is where you can use your Bitcoin for a variety of different services. Of course, they've got your Bitcoin backed loans. This is where you can use your Bitcoin as collateral for Canadian or US dollar loans. So if you need dollars in a pinch and you don't want to sell your Bitcoin because, one, that's a taxable event. And two, you're worried about having to buy back in at a higher price point.

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So I do recommend check them out. Up next we have our friends at... Of course, we've got our friends at Crypto Cloaks. These guys are so awesome, and I've got exciting news today because they sent me something I'm very excited for. It is my, oh, it's so pretty. It's my new node case. So this case is going to be my brand new node that I'm building for Get Umbrel,

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As you've seen, obviously, they've got node shells, but they've got a ton of other stuff. The Bitcoin grenades are huge. They're great gifts. You can put open dimes in them stacked with Bitcoin in there. They've, of course, got tons of sticker packs. They've got their Honey Badger's shelf where you can store hardware wallets.

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all one word at checkout, and you'll get. And finally, we have the Kobo Vault. I've done a full tutorial on this thing. It's gone into my regular rotation of regularly used hardware wallets. I love it because it is fully air-gapped, everything over QR codes. You never plug this into an internet-connected device. It's, of course, got a secure element in it. It has open-source firmware, and, of course, it's interoperable with all of my favorite

wallets. You can use it with Bitcoin Core. You can use it with Electrum. You can use it with Wasabi Wallet, which is my go-to-destop wallet. And you can use it with Blue Wallet, which is my go-to-day phone wallet. So, be sure to check out the Kobo Vault. you're looking for a hardware device. I use the cobo vault pro because it has the rechargeable battery. But there is a link in the show notes if you want to grab one of those and of course helping the show

in the process. But hey, we don't just take here. We give away. Cobo's doing a giveaway as per usual. Every show to the end of November, if you want a cobo tablet plus, which is a steel plate to store the backup to any wallet you may have, all you need to do is jump on Twitter, retweet the show, tag myself and Kobo in it, and just let us know why you want one. I'm picking a winner, as I said, for every show between now and the end of November. With that, let's dive into the news. And of course, the big news that everybody's talking about the past couple days, Bitmex founder arrested for violation of U.S. anti-money laundering laws,

amongst other things going on here. But I'm going to read a little bit from Brave New Coin here. On Thursday, the U.S. Commodity Futures Trading Commission announced the filing of a civil enforcement action in the U.S. District Court for the Southern District of New York charging five entities and three individuals that own and operate the Bitmex trading platform with operating an unregistered trading platform and violating multiple CFTC regulations, including failing to implement required anti-money laundering procedures. Bitmex co-founders Arthur Hayes, Ben Dalo, and Samuel Reed were named as defendants in the complaint. Samuel Reed, the only defendant to be based in the U.S. was arrested in Massachusetts while the other defendants remain at large. In addition to the CFTC charges, the U.S. Department of Justice has accused the same defendants of violating the Bank Secrecy Act and conspiring to violate the Bank Secrecy Act by, willingly failing to establish, implement, and maintain an adequate anti-money laundering program at the Bitcoin Mercantile Exchange, or Bitmex.

The case has been assigned to the United States District Judge John G. Coltel. I'm not sure how to say that last name. Anyways, the CFTC alleges that Bitmex has received more than $11 billion in Bitcoin deposits and made more than $1 billion in fees while conducting significant aspects of business. from the US and accepting orders and funds from US customers. Now, before we go into a little bit more of this, let's just kind of break down what has happened.

Effectively, what they're saying is based on the SEC's accusations here, this was an illegal securities trading platform. You're not allowed to offer it to people in the US. The problem was that people in the US were indeed using the platform. platform. However, it's funny because Bitmax does on their website say if you're in the US, you're not allowed to use this exchange. And furthermore, they block any IP addresses coming out of the US. The way that US customers were getting around this is that we're using VPNs or virtual private networks, which effectively kind of piggyback on an IP address outside of the US's jurisdiction

and then go to the Bitmax website. So, you know, BitMex, they kind of, they kind of, they kind of kind of somewhat argue, well, then you've got to go and you've got to block VPNs, and you've got to go and you've got to request full KYC from everybody in order to ensure that they're not from the U.S. However, that subjects anybody outside of the U.S. that wants to use Bitmex's platform to perhaps privacy concerns that they don't want to be subjected to. Because after all, that's a U.S. law. This is US law applying to a company based in Hong Kong that is trying to serve customers not in the US. And so the implications here are that the US is effectively saying if you're a company like fucking anywhere, you have to abide by our laws.

You have to impose all of these extra restrictions and all of this extra KYC AML and data collection on everybody, regardless of whether you operate in the US, just to ensure. sure that you're not taking any U.S. customers, which is massive overreach. I think this is total bullshit as far as that goes. Sure, again, you could argue like they've got to block VPNs and stuff like that, but should they have to is kind of the issue? Like really, do they have to? They've already said you're not allowed to use this if you're in the U.S. and they've already blocked US IP addresses. In my eyes, I feel like that's enough.

And honestly, I think that these agencies should go fuck themselves. But obviously, the US being the US, they're going to try and overreach and basically force their will upon everybody across the globe. Now, BitMex has turned around and basically, pretty much told them to go fuck themselves, which is nice. So what happened is these entities are saying that they wanna seize all of the assets of Bitmex.

The issue here is that Bitmex holds a lot of Bitcoin and they've been allowing withdrawals. So first of all, Bitmex denied the ruling. They said, Bitmex statement claimed that from our early days as a startup, we have always sought to comply with applicable U.S. laws, and those laws were understood at the time and based on available guidance. What exactly U.S. applicable laws are will likely be central to the case. Bitmex has long maintained that it does not serve customers in the U.S., though others before

the CFTC and DOJ have argued that this is a lie. The CFTC's case rests on Bitmax's failure to register with the commission as a derivative exchange in the U.S. Again, they're not, but U.S. customers are finding ways around to get to use Bitmex. Anyways, the DAOJ, on the other hand, argues that BitMex deliberately failed to implement effective KIC or Know Your Customer and anti-money laundering programs in violation with the Bank Secrecy Act. Both agencies assert BitMex had years of warning, and there are prisons illegal. In its posting denying the charges, BitMex also assures

users that trading will continue as usual, this despite the fact that the DOGA arrested at least one of Bitmex's founders, Samuel Reed, earlier today. So on that same point, so Bitmax is basically like, tough shit, trading is going on, we're going to fight this. And the beautiful part is that the US couldn't seize the Bitcoin because it's in a multi-sig. Now, they arrested one of the founders who has a key to that multi-sig. But with a multi-sig setup, you need multiple keys, approval in order to move the funds. So that single key that they that these US entities may have access to now means sweet dick all because Bitmex has continued to allow withdrawals, which there have been a lot. $420 million worth of Bitcoin has been withdrawn from Bitmex, which is a good

thing because what they've done is they've said, listen, heads up, the US is trying to shut us down and seize our assets, go ahead and start withdrawing. And they have enough keys to allow for this to happen. And so, you know, people have been doing it because there's a very real risk of those funds being seized and people basically having their Bitcoin frozen for however long these charges take place to be settled, which could be years. So if you have money on BitMex, get it off while you can. Like, get over there quick and withdrawing.

it, but I really love the giant middle finger that they've given by allowing this money to be withdrawn. And again, that's kind of the beauty of Bitcoin. I know that the regulators are not going to be happy about what BitMex is allowing for here, but the customers are being protected. And BitMex has always been a pretty good, they've been good in general with kind of like the values of Bitcoin. Yeah, okay, sure. D-Gen trading is not really, I'd say, a value of Bitcoin. But in terms of like keeping up on the latest making sure that they're responsible and implement good things that help with the health of the bitcoin network itself funding actual developers and and only dealing with bitcoin they've never listed shitcoins they've just allowed for you to long and

short them via bitcoin so you can't like deposit or withdraw or buy or sell any shit coins on bitmax it's just a derivatives trading platform so anyways um Yeah, I'm, I'm, kudos to them. Again, they have been allowing people to withdraw. And I just wouldn't roll the dice and leave my Bitcoin anywhere there. If you were using BitMex, just head over there. Take that shit off. Please.

Again, in the regulatory circle here, we were talking about some SEC kind of judgments last week, where they charged an ICO that happened in late 2017 for salt lending. and basically said this was an illegal security offering. Well, again, a judge has ruled against KIC, which is a messenger service that kind of had like a last ditch effort to stay afloat by creating a token called KIN, which was supposed to be an in-app currency to pay each other on the Kik Messenger, which like who you don't, you're not,

you don't want a separate currency for every app and messenger that you use. You're probably just going to want to use a currency. So anyways, yeah, like the token was useless as it was anyways, but the dude behind it, he went on this tirade about it and had some, what was the website? He had some website basically like save crypto or protect crypto.com or something like that where he was like, we need to stand up for this. And everybody was like, do we though? Because it's Kick Messenger. And like, yeah, I'm, okay, I should. clarify. I personally, I would prefer that these regulators just kind of like let shit figure itself out.

If people want and think that there's going to be value in a token that's exclusively used on Kick Messenger, then that could be a valuable learning experience for that individual. And I think a lot of people have been babysat so much through their whole lives when it comes to anything monetary that people are more likely to make bad decisions, but if those bad decisions actually had consequences, then you would learn over time and you would be much better with your money and much more considerate with where you put it. Anyways, besides the point, just a short read here, a U.S. judge ruled Wednesday that KIC violated securities law when it raised $100 million via a token sale in 2017. Judge Alvin Hellerstein, a U.S. District Judge

in the Southern District of New York wrote that in his view, Kicks Token Distribution Event, or TDE. They kept on changing up the acronyms because they said, everybody thought like, well, if ICOs are not okay,

then we'll just change it to like whatever. I, you know, they changed the acronym every single time to whatever else. But anyways, their TDE, which was an ICO, satisfied the three prongs of the Howie test referring to the U.S. Supreme Court case used as a standard for determining whether the sale of something is a

security sale. The SEC, which filed the suit against KICC last year, had maintained the messaging platform's kin token sale, was an unregistered securities offering. While Kik claimed it's not, well, looks like they were wrong. Again, this shit's going to keep on happening. It's taking years to catch up with all of the ICO stuff that happened in the mania of 2017 and into 2018, a few years from now you're going to see all of this defy shit go through the same thing because everybody's thinking it's decentralized or they're just using the buzzword of decentralization when in reality a lot of these tokens and decentralized finance applications that are issuing tokens have kill switches, have people in charge of them, have companies associated with them,

all of which the SEC will be able to sniff out and crack down upon later. Again, I'm not advocating that they do. I think people should be able to make their own mistakes, but I'm saying that they will. And there's a difference there. And don't fool yourself into thinking that all these things have long-term staying power because they are not decentralized. Moving on, this interesting out of Coinbase,

so this was a few days back. So kind of somewhat older news here, but Coinbase dropped this blog about their mission, and rather Brian Armstrong CEO of Coinbase, drop this. And, you know, I don't like Coinbase. I don't like their company and kind of what they've turned into over time. However, I did like this take from Brian Armstrong. And effectively, it's a long blog post, but he talks about kind of like the mission of the company, what they're trying to do, what they hope to do.

And again, like their tactics of how they're achieving it, I disagree with. I think it's just become a shit coin casino like a lot of other places. But what he got down to the nitty gritty of was they don't want bullshit politics put into their business. They're not going to become a method for people to take their political stances and funnel it through their workplace. They are a for-profit business. They will continue to go after the mission of whatever their company has set out to do. But outside of that, that's not their focus, and that's not going to be the focus of the company, and it never will be. And so they said here, we've clarified this new agreement.

Basically, they shifted kind of the company policy here. They clarified this new agreement and some new internal communication guidelines that we published in the last month. But in summary, it says, we won't debate causes or political. candidates internally that are unrelated to work. We won't expect the company to represent our personal beliefs externally. We won't assume negative intent or not have each other's back and we won't take on activism outside of our core mission at work. And I've got to say, I kind of miss when most companies did this where they're like, listen, we make burgers or chicken or, I don't know, computers or whatever.

And that's just what we do. We don't need to attach messages to it. And people can use our product. That's great. But as far as our political stances go, you know, each individual within a company is entitled to their own views. I prefer that. I don't want to, like, if I'm going to buy a burger,

I just want to have my burger. I don't need to, you know, I can think about my politics at the polls if I choose to go vote. However, Twitter CEO, Jack Dorsey, kind of came out and said the opposite. He said Twitter CEO, he responded that by the very act of being a crypto exchange, Coinbase was already activist by definition and there's no point in pretending otherwise. He said Bitcoin, aka crypto, is direct activism against an unverifiable and exclusionary financial system, which negatively affects so much of our society. Important to at least acknowledge and connect the related societal issues your customers face daily.

This leaves people behind. So here's the deal. I do understand that Bitcoin in itself is political in a way. it was very much meant as an opt-out of the current monetary system that we have today. However, Coinbase has not exactly taken

I mean, yes, they acknowledge that but they've gone the route of every token out there is valid and it has very much become like a look at this plethora of shit coins to buy from us. And they've gone like the trading route. They may, again, I don't, I don't agree with like the company trajectory and what they're doing.

I just agree with the idea that Brian says, like, we're not going to inject politics into this. This is what we do. And that's what we're focused on. And it's funny because I agree much more with Jack Dorsey's stance on Bitcoin being the important one shot that we have to fix the money and that everything else is a distraction. but I don't agree with his stance that we need to inject politicism into the companies that are doing this. Honestly, I... It's tough.

Like, I don't agree necessarily that you need to be an activist to run a company is what I'm getting at. So I'm with Jack on the Bitcoin-only front. I'm with Brian on the... let's not let too much politics into this and try to become activists on every single front. I think the activism in Bitcoin is just, hey, there's better money over here. Do you want to use this instead? I think that's enough.

I think that's all you need. Anyways, back to shitty things about Coinbase. Coinbase UK is about to disclose a wave of cryptocurrency owners to the HMRC, which is the UK's tax. So just a short read here. Coinbase owners in the UK who have received more than 5,000 pounds or around $6,500 in cryptocurrency will have their details passed to the UK's tax authority, HMRC, according to an email from Coinbase seen by decrypt. The email said that HMRC originally required Coinbase to provide certain records of its UK customers between 2017 and 2019. However, after discussion with the tax authority, the notice was revised so that it only only was. only affects users that meet some minimum requirements was, which was 5,000 pounds. Still not great.

What more do you say to that? I mean, I don't like Coinbase, but at the same time, like if they want to operate in a certain jurisdiction, then they just kind of, they have to go by the laws of the land, and apparently those are the laws there. So yeah, you can always look elsewhere. So if you're worried about this kind of stuff, you can always look at things like BISC and Hoddle-Hoddle. Those are more decentralized kind of peer-to-peer options where you can link up with individuals and purchase that way.

So you can go and Google. I haven't done videos on those. I think that's on the docket, though. Maybe I should. And finally, I want to touch on one more thing. The ECB or the European Central Bank says it must be prepared to issue a digital euro. So a little bit here from DeCrypt. The ECB said today that it must be prepared to issue a digital euro in light of the way that digitization is.

spreading to all areas of life. Today's announcement has been timed alongside the publication of a digital euro report, which set out the reasons to issue a digital euro. The potential effects, this might have on the continent as well as the legal consequences that the digital euro might cause. But one thing is for certain, the ECB wants to protect the euro from getting left behind. So they said, quote, here, the euro belongs to Europeans and we are its guardian. We should be prepared to issue the digital euro should the need arise. Yeah, I mean, they just, it kind of reads like, hey, we're trying to stay irrelevant. But I don't really see. So, the most interesting part of this article that I found was here. It says, the report also clarified

that digital euro would not be a crypto asset or stable coin. The quote, the digital euro would be a risk-free form of central bank money, which means that it is issued by the central bank and remains its liability at all times. The report said, adding that crypto assets in contrast are not a liability of any entity. And so what it means is that the ECB would effectively create and then lend out the euro as a liability, whether it be to other banks or individuals. Okay. And so it's a it's like the base currency, but if they lent it out to banks, then those banks could then use that base currency to go fractional reserve and issue like a separate, um, with, with more risk, a separate currency that would effectively be like the fractional reserve

version of that, uh, inflating the monetary supply that way, which is how it currently happens. Um, it's still all digital. So I guess really the only different, here is that potentially individuals could have a wallet and hold a central bank digital currency on their own, potentially, but I don't know if they're going to want or allow that, but I think what they're saying here is they're maybe mitigating the risk of banks being a potential threat to stability. And so it kind of maybe I'm reading this wrong, but it kind of seems to me like the ECB is saying like listen the stuff going on with with commercial banks and their fractional reserve is a potential systemic threat and at least if we have a sound i say sound

laughingly but a more sound monetary base issued specifically by the ECB that citizens could have access to potentially that's a little bit easier to deal with you don't have the inflation upon inflation, I don't know. I still think it's stupid. I still think that their solution is like a half-baked solution and that maybe it'll get used, but it gives them, I guess, more control. They could, if you had an ECB wallet, then they could create more base currency and get it to you directly. it might step around the extra step of going through commercial banks, which we're kind of seeing in the U.S. right now where it took forever to get people dollars for all the COVID stuff when they sent out $1,200 to everybody.

It took a while. It wasn't an easy process. So had there been such thing as like a Fed wallet, then they could have just typed in a number, and it went out to all the Fed wallets. I don't know. But it also would potentially allow more restriction on the flow of money. So there's that.

There's definitely the kind of 1984 Orwellian angle to it. But luckily, who gives a shit because there's Bitcoin? Anyways, guys, I'm going to wrap it up there. Thank you so much for watching and or listening. If you're here on YouTube, please do hit like, subscribe, and share all of those things. really, really to help. I can't stress enough. Please do them.

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And if you want that steel seed plate, you can retweet the show, tag myself in Kobo and let us know why you want one. And if you really loved what you saw, you can always drop me a Bitcoin Lightning Network tip at my Tippin.me page. That is t-I-p-p-in.me-slash-at-B-T-C sessions. With that, I'm out. Have yourselves a wonderful evening, a wonderful weekend,

and I will see you next time for your daily session.