The UK's Financial Conduct Authority (FCA) will be holding consultations on a "potential prohibition" of cryptocurrency-based derivatives, in order to protect consumers from risks posed by digital assets.

"[T]he FCA will consult on a prohibition of the sale to retail consumers of all derivatives referencing exchange tokens such as Bitcoin, including CFDs, futures, options and transferable securities," read the policy paper by the Cryptoassets Taskforce, which is composed of the FCA, HM Treasury, and the Bank of England. Not included under the proposed ban are cryptocurrencies classified as securities, which are then to be regulated by the European Securities and Markets Authority (ESMA).

The paper noted that the FCA has already supported ESMA's restrictions on contracts for difference (CFDs) that reference cryptocurrencies, a measure that took effect last August 1.

The report added that the FCA "will not authorize or approve the listing of a transferable security or a fund that references exchange tokens (for example, exchange-traded funds) unless it has confidence in the integrity of the underlying market and that other regulatory criteria for funds authorization are met."

The consultations have been scheduled for some time before the end of the year.

The task force also called for further clarification of general regulations for the cryptocurrency market, expressing similar concerns as the UK Treasury committee in its report released in September, such as price volatility of many virtual currencies.

While acknowledging the benefits of the use of cryptocurrencies, such as increased efficiency of financial transfers and the capacity to raise funds, the task force said, "Evidence of the current generation of cryptoassets delivering any of these benefits is limited and many use cases are unproven at a large scale," leading it to conclude that "in many cases, the risks posed by the current generation of cryptoassets outweigh any potential benefits."

The task force noted that the UK government itself is exploring the use of blockchain technology apart from financial services, having invested more than £10 million for various distributed ledger projects, and creating a £20-million GovTech Catalyst Fund to study applications of the technology for the public sector.

Last year, the FCA had already warned of the risks in investing in CFDs, but without suggesting a prohibition. It also issued guidelines last April affirming its authority over the trade of derivatives.

60% of Americans believe that it should be legal to donate cryptocurrencies for election campaigns, under the same rules that apply to U.S. dollar donations.

Research company Clovr, surveying 1,023 eligible voters in the country, also found that only 21% disagreed that cryptocurrency donations should be allowed.

At present, cryptocurrency donations are treated as in-kind contributions limited to $100 worth at the time of donating. This is based on a 2014 ruling, when the price of BTC was around $440.

54% of respondents said that cryptocurrencies were secure enough to be used for political purposes, while 73% of those who claimed to be knowledgeable about digital currencies said that security was not a problematic issue.

Only 42% saw cryptocurrencies as financially stable enough for political purposes. 52% of self-identified Republicans answered in the affirmative, whereas only 40% of Democrats and 35% independents did so.

Only about 25% said they would be more willing to donate to campaigns if cryptocurrencies were an option like fiat currencies. "[M]ost contributors still prefer to donate with U.S. dollars, but a growing number said they would prefer to either give exclusively with digital currencies or a combination of both dollars and cryptocurrency," Clovr noted.

Even though more than half of respondents supported legality of cryptocurrency donations, 62% said cryptocurrencies were more likely to be used illegally in the U.S. political system, compared to the U.S. dollar. "Even a slight majority of people who were incredibly familiar with cryptocurrency believed illegal campaign activity would increase," Clovr said.

The firm added, "State governments haven't yet jumped on the cryptocurrency bandwagon, but if the FEC [Federal Election Commission] and other federal agencies expand its use, then history indicates many will follow."

Already, several politicians have made use of cryptocurrency donations in their campaigns, including Brian Forde, running for California's 45th Congressional District, who received the support of, among other investors, the Winklevoss twins, founders of the Gemini cryptocurrency exchange.

G4S (LSE: GFS), a security services provider with operations in more than 90 countries, guards everything from cash transfers to nuclear power plants and prisons. The London-headquartered company has now started to offer cryptocurrency protection, according to a recent report.

Secure Vault Storage

The company, which has more than 560,000 employees throughout the world, announced on Wednesday that it has developed a new service providing high-security offline cryptocurrency storage, to help to protect assets from criminals and hackers. And the company is already providing the service to an unnamed European exchange, according to the Financial Times. It charges clients based on the number of different offline storage devices they want to use to store their private keys, and reportedly uses its own existing vaults for the service, rather than newly built facilities.

The company's press statement confirmed that cryptocurrency exchanges are already turning to them for help. Dominic MacIver, senior risk analyst at G4S Risk Consulting, commented: "Our clients approach us to discuss solutions to their requirements because of G4S Cash Solutions' experience in protecting high-value items and G4S Risk Consulting's experience in developing bespoke solutions to complex challenges. Working with our clients, we are continuously applying their expert knowledge of crypto-assets and our best practice in physical security to a sector at the cutting edge of financial technology."

Heavily Restricted Access

The service is said to be more secure then other methods because G4S takes the keys offline, breaks them up and stores them in high-security vaults. Moreover, access to the sites in which they are held is said to be heavily restricted, with multiple layers of security. Clients can only gain access when all of the pieces are combined with specific technology.

"Offline storage has become a more established and secure way of storing crypto-assets," MacIver said. "At the same time, violent robberies and kidnappings in recent years have shown that the sector is still exposed to conventional criminal threats. In collaboration with our client, our security solution is built on a foundation of 'vault storage.' We not only take the assets offline, but break them up into fragments that are independently without value and store them securely in our high security vaults, out of reach of cyber criminals and armed robbers alike."

New Research Claims Most ICOs Have Profited Off Selling ETH

Bitmex Research is back with another detailed report, this time into the ethereum holdings of ICOs. Ethereum's downward trajectory has been attributed in some quarters to ICOs offloading ETH to pay the bills. If so, data suggests that those projects have profited handsomely off their ETH holdings in USD terms, despite its falling price.

Ethereum's tanking price, sliding from over $1,400 to below $200 in seven months, has alarmed many cryptocurrency investors. ETH is the backbone of the ICO economy, and its inability to sustain support levels against BTC has led to fears of there being a run on ethereum, akin to that which occurs when customers fear a bank lacks the funds to cover its liabilities. If Ethereum projects believe the cryptocurrency is likely to drop further, they will feel pressured to sell in order to maximize their capital, further accelerating the token's decline.

Commenters have been in disagreement over the extent to which ICOs cashing out has triggered ETH's downfall. Dapp Capitulation has been the go-to tool for anyone trying to keep track of which ICOs are moving ETH (presumably with the intention of selling) and when. In the last 30 days, for example, Status has sent 8,000 ETH to an exchange wallet and Decent has moved 20,000. New research from Bitmex and Tokenanalyst, however, provides a more holistic picture of ICO movements of ethereum. Its key finding?

Rather than suffering because of the recent fall in the value of ethereum, at the macro level, the projects appear to have already sold almost as much ethereum as they raised (in US$ terms).

The Coffers of Last Year's ICOs Are Not Yet Empty

In determining the profit or loss realized by Ethereum-based tokensales, Bitmex Research has created two columns: one for EOS and the other for everything else. Since EOS raised about as much as the rest of the market put together during its year-long fundraiser, it was necessary to record it separately to avoid skewing the data. A macro analysis of 222 ICOs found a total of 15.1 million ETH was raised, of which 11.3 million has been transferred out or sold. This leaves a remaining collective balance of 3.85 million ETH. Since EOS has offloaded all its ETH, this sum is shared among the other 221 projects.

The most useful data provided by Bitmex Research and Tokenanalyst is a calculation of whether ICOs that have sold a lot of ether can be expected to have made a profit or a loss. Broadly speaking, the older the ICO, the likelier it is to have profited from its ETH holdings. Projects that raised funds in late 2017 or this year, on the other hand, are almost certain to have seen the value of their crypto assets dwindle. Overall, the report finds non-EOS projects to have recorded net realized gains of $727 million through selling ETH, and to be sitting on another $93 million in unrealized gains i.e. ETH they've yet to sell.

Not all projects have prospered: it's estimated that $34 million in ETH has been lost by projects being forced to liquidate their holdings at below the value they held during their crowdsale. The report concludes: "Despite the 85% reduction in the ethereum price from its peak, the projects have realised gains of US$727 million due to profits from ethereum they have already sold, often selling before the recent price crash. The 3.8m ethereum still on the balance sheets of these projects may not have that much of an impact on the ethereum price, as it represents a reasonably small proportion of the 102 million supply of ethereum. At the same time, on a macro level, the projects may be feeling reasonably confident rather than needing to panic sell."