How Russia became a breeding ground for cryptocurrency innovation

Cryptocurrency has found support all over the world. It is popular as a solution for common business problems in many industries, but also allows people to invest and speculate as they would with stocks.

For both reasons, companies and individuals around the globe are motivated to participate in cryptocurrency, but when this adoption reaches a certain point, governments step in to have their say. This makes perfect sense, as there are no other entities with such a significant stake in the status quo.

Chinese citizens were on the leading edge of both Bitcoin mining and trading for years until China’s government and central bank made sweeping regulatory changes out of fear over the implications of cryptocurrency on its Yuan. Others like Sweden and Japan have worked to integrate it into their societies by making cryptocurrency legal tender, and allowing the creation of new financial instruments like bonds based on Bitcoin.

Some countries choose not to take a stance, much like America, which has largely elected to leave young cryptocurrency markets alone. Russia, on the other hand, has a different relationship with the technology altogether.

The big pivot

After the biggest year for cryptocurrency yet, wherein the total industry’s market cap flew past $200 billion and illustrated multiple new use cases, countries that haven’t addressed this trend are late to the game. Until recently this group included Russia: a country that is typically comfortable to wait for other major international entities to take a stance before acting in turn.

Before the boom in Bitcoin took the currency past the $7,000 mark (at the point of writing this article, Bitcoin price is at around $16,000), Russian politicians and bankers made their conflicting opinions and hesitancy known. Vladimir Putin called for tighter regulation of cryptocurrency just a month before his speech about nurturing the young technology, and influential central bankers likened cryptocurrency to a pyramid scheme . There was even a proposed punishment for owning Bitcoin that would have seen citizens jailed for up to seven years for being in violation.

These combative statements from the Kremlin and central bank have recently pivoted, with a string of announcements that solidify Russia as a potential epicenter for the inevitable cryptocurrency revolution. One of the greatest catalysts for this turnaround is demand from people all over the world for digital cash as instruments of investment, payment, and more. Russia has answered their call, but in a distinctly Russian way.

Russia comes out as pro crypto

In late October, President Putin announced his support for cryptocurrency in Russia and ordered legislation to create infrastructure for its national adoption. Five distinct legal structures were created: for taxing cryptocurrency miners, nurturing blockchain technology in business, regulating initial coin offerings (ICOs), and creating a comprehensive payment system for citizens. The most startling announcement was Putin’s intention to build a digital version of the ruble called ‘CryptoRuble’.

From what little we know currently, the CryptoRuble is intended to be exchangeable with the ruble on a 1:1 ratio. Unlike traditional cryptocurrencies, it cannot be mined, and will issued by the central bank exclusively. This approach is uniquely Russian, and is based on years of careful observation about how cryptocurrency is affecting other countries.

It sacrifices some economic freedoms for government control, while still including the technology’s greatest advantages. An immutable ledger will make citizen cash flows transparent to the government and help stem fraud and corruption, while also tearing down barriers between systems plagued with middlemen.

Interestingly, CryptoRuble income will be taxed at 13 percent for those who cannot provide a legitimate source for it, which is both an attempt at stemming corruption but also a way to profit from it.

A stake in the 21 st century

As the world saw with last year’s Russian influence in the United States presidential election, it is important for Russia to have a finger in every pie, but also to protect their own borders fiercely. The country’s leadership is ever-vigilant of new ways to gain an edge in international politics, finance and trade. Cryptocurrency is one of the likeliest avenues for increased influence across borders, so Russia’s renewed interest is logical.

In the past, even Russia-based cryptocurrency projects weren’t significant enough to win explicit government support. Services like Russian Miner Coin (RMC), a platform supported by a Russia-based mining operation, operate in the same borderless way as other decentralized financial platforms, and don’t suit the country’s insular political temperament. These platforms are too democratic, and would allow outside influence to have a say in the value of an otherwise Russian currency.

Recent sanctions imposed on Russia by the United States give the country another reason to spur adoption of their own custom solutions. If Russia were to create a decentralized system for selling its petroleum anonymously, for example, they could skirt these sanctions and continue to operate without oversight (or consequences).

The Russian revolution

Regardless of sanctions, more efficient financial tools, or increased oversight, Russia wants cryptocurrency because the world wants it. In a country whose main export is quickly becoming obsolete, fostering a friendly environment for the globe’s newest source of demand is both politically smart and fiscally responsible.

Politics, finance, and the citizenry of Russia are slowly moving towards blockchain-based infrastructure. For Russia especially, blockchain must be a compromise between autonomy and control, and this reality will require a delicate hand, but it is already underway.

South Korea’s largest cryptocurrency exchange under investigation for fraud

Upbit, the fourth largest cryptocurrency exchange in the world, is under investigation for charges of faking its balance sheet and deceiving investors.

The exchange’s office in Seoul, South Korea, was raided by 10 investigators from the country’s Financial Supervisory Service (FSS) at 10 AM KST today, local publication Chosun reports .

The investigators have reportedly seized Upbit’s computers and account sheets to review the company’s cryptocurrency holdings.

While the authorities have not yet pressed charges or released a full report of the investigation, it appears that Upbit users are withdrawing their funds from the exchange desk en masse, according to market data.

South Korea has been shifting the focus from outright ban of cryptocurrencies and ICOs to defined regulations since the beginning of this year.

This has, however, meant greater scrutiny of cryptocurrency businesses in the country.

Back in January, local law enforcement similarly raided the offices of popular exchange desks, Bithumb and Coinone, on charges of tax evasion.

Four executives from two different cryptocurrency exchanges including Coinnest, South Korea’s fifth largest cryptocurrency exchange, were also arrested last month for charges of embezzlement and fraud.

“The whole world is now framing the outline (for cryptocurrency) and therefore (the government) should rather work more on normalization than increasing regulation,” Choe Heung-sik, chief of FSS, the agency responsible for this investigation against Upbit, told reporters in February this year.

[H/T Joseph Young ]

TRON’s sloppy PR shows everything that’s wrong with cryptocurrency startups

Fledgling cryptocurrency startup TRON got its first big break three weeks ago, when anti-virus pioneer John McAfee shilled its TRX coin to his 500,000-plus followers. Days after that, the McAfee effect was on full display and TRON’s value had skyrocketed from a measly 4 ¢ to almost 29¢.

But it seems this astonishing bull run is gradually coming to a halt – and not without reason.

Shortly after breaking into the top-10 cryptocurrencies by market share, TRON found itself attracting tons of negative press, implicating the company in a series of shifty activities: from plagiarism to misrepresenting announced partnerships. As a result, its price has since flopped back to under $0.10 – half of what it was less than 10 days ago.

In all fairness, such extreme amplitudes are nothing uncommon in the world of cryptocurrency – but this case calls for closer scrutiny.

For those unfamiliar (McAfee followers especially), the TRON blockchain network was built with the purpose to empower content creators across the globe to profit from their work by sharing it in a global entertainment system.

Indeed, all stars seemed to be aligning for TRON when CEO Justin Sun – who has previously appeared in Forbes’ 30 under 30 on two separate occasions – revealed that the company had reached a partnership with ‘Chinese Netflix’ Baofeng, which boasts more than 200 million users.

The announcement could have gone a long way to proving The Washington Post and its claims that TRON “doesn’t actually exist” wrong… but somehow the company managed to screw up even this news.

While the news was initially met with huge excitement, inquisitive internet sleuths were quick to point out that the announcement appeared to be slightly misleading.

Some users have noted that the comparison to Netflix seemed like a stretch, given that Baofeng was best known for providing video player software – not producing actual content.

In addition to that, TRON’s own announcement hinted that the partnership was not with Baofeng per se, but with a subdivision within the company known as the Blockchain Consensus Network (BCN). According to the announcement, the collaboration between the two companies would see BCN hardware support TRON and run full nodes on its network.

Though TRON is by no means the only crypto-startup to miscommunicate a partnership , what made this blunder particularly embarrassing is that the company was already dealing with heated backlash for purportedly plagiarizing its white paper from competitor Filecoin.

In fact, the scandal escalated so much that eventually the TRON boss had to take to Twitter to blame the issue on poor translations.

Sun went on to suggest that the reason for the missing references was not plagiarism, but sloppy work from TRON volunteers who opted to translate the original Chinese version of the white paper to English, Korean, Japanese and Spanish. Still though, some have indicated that even the Chinese original seemed to be lacking proper citations.

The plagiarism claims swiftly became the talk of the internet, prompting cryptocurrency pioneer and Litecoin creator Charlie Lee to retweet the news, attracting even more attention to the scandal.

Eventually, Sun had to come forward and accept blame for this flub-up one more time, promising to do his best to avoid such misunderstandings in the future.

But these are hardly the only gaffes TRON has been embroiled in.

On another occasion, Sun had to once more step in to dispel rumors that he had cashed out his positions in TRON, after recreational investigators discovered a wallet that had transferred more than 6 billion TRX coins to various addresses.

Sun claimed that the address, which had been linked to a CryptoKitties account that contained the name ‘justin,’ belonged to an early investor, who happened to share the same name with the TRON CEO. In fact, the trading activity, Sun insisted, was intended to increase liquidity – not to sell TRX.

One would think that after all of this chaos, TRON would learn from its mistakes and try to avoid further drama on all costs – but alas, the company has found itself in yet another controversy.

Two weeks ago, sharp-eyed users noticed that TRON had potentially violated licensing rights by borrowing code from Ethereum without attributing it with the correct citations.

The TRON Foundation was swift to respond to the claims, but its reply seemed wildly irresponsible, chalking up the missing references to “festinate time.” The company then went on to ignore the stolen code controversy for two weeks, until concerned Redditors resurfaced the issue over the weekend.

The renewed interest in the matter has since convinced the TRON Foundation to issue an official statement – though it seems that this statement was posted exclusively on GitHub, which is not the best place to clarify controversy, to say the least.

The design of TRON is based on it’s [sic] own system and the realization of codes,” the statement read . “[S]ome codes of Ethreum were used as reference, we didn’t note related license, from now on we will note the copyright ownership and promise this won’t happen again.”

With less than six months under its belt, TRON is still a fledgling company – and while one could blame the string of mishaps to its immaturity, ignoring its organizational woes could spell big trouble for the startup’s future.

What makes things even worse is that Sun and colleagues are yet to showcase legitimate use cases of its technology – which many have deemed vaporware . The worst part though is that it’s getting increasingly difficult to maintain credibility when your entire project is mired in controversy.

Say what you will, but a company can recover from bad publicity only so many times before it turns into a cautionary tale – and TRON might very well be approaching its own limit.

For what is worth, cryptocurrency startups face similar criticism practically every day… but it is getting difficult to ignore all the red flags that hint TRON is another disaster waiting to happen.