This week in tech: India, Turkey, UK make moves as China’s investment drops



The world's first central backed digital currency is yet to see the light of day, but progress is being made. This week, the Bank of England announced that it plans to explore possible use cases for a digital currency. The BoE has joined hands with the Bank of International Settlements and five other central banks in the project, among them the Bank of Japan and the European Central Bank. The move could be among the most significant steps in the push for the use of CBDCs across Europe and beyond.

The move by the BoE is one of many in the past year, as the world seeks to adopt blockchain-based digital currencies. According to the World Economic Forum, central banks are waking up to digital currencies. During the Davos 2020 conference this week, the WEF launched the CBDC Policy-Maker Toolkit that's aimed at helping central banks find the best way to integrate digital currencies into their monetary systems. The organization gathered insight from central bank researchers, international organizations, global policy‑makers and experts from over 40 institutions.

Still on CBDCs, the MIT blockchain research group believes that most of them will use technology currently being applied by existing digital currencies. The Digital Currency Initiative published a report this week stating that most CBDCs will copy features such as "the usefulness of programmability in money and the importance of preserving user privacy."

In India, the government is struggling to find some middle ground on crypto and blockchain. While the Reserve Bank has had its issues with crypto, the country's securities regulator believes blockchain will play a key role. Ajay Tiagi, the chairman of the Security and Exchange Board of India is urging the exploration of blockchain applications in the securities market, such as in clearing, settlement and record-keeping.

Still in India, the country's Telecoms and IT Minister has called for blockchain solutions for improving quality of government schools. Ravi Prasad called on the National Informatics Center to develop solutions for public schools, saying he is very keen on leveraging blockchain technology in primary education. He was speaking during the inauguration of a blockchain center of excellence in Bengaluru.

In Turkey, the city of Konya is working on integrating blockchain, including developing its own digital currency. The city has blockchain experts already looking into how the technology can be integrated in social programs. The proposed digital currency, City Coin, will be used in the social programs as well as other state payment systems.

The world's largest brewing company is also using blockchain, leveraging the technology to help African farmers prove their income. Anheuser-Busch InBev, the maker of the popular Budweiser, has developed a blockchain-powered system that keeps track of all the farmers supplying it. This system replaces the tedious paper trails previously used. The farmers can use it to prove their income to banks and other financial institutions, a crucial factor in acquiring credit facilities.

Argo Blockchain had the best year yet in 2019, a report this week revealed. The report claimed that the crypto mining company saw a tenfold increase in its revenue last year. Argo, which is listed on the London Stock Exchange generated $11 million, up from $987,000 in 2018.

While blockchain technology is rising to the top, China has scaled down its investment in the technology. A report by state-run Xinhua revealed that the country saw 245 financing deals in blockchain in 2019. These deals accounted for $3.6 billion, a 40.8% drop from the previous year. Beijing, Shenzhen and Hangzhou had the most deals, the report stated.

FATF Holds Global Forum to Discuss Crypto Supervision



The Financial Action Task Force (FATF) and over 50 delegations involved in crypto supervision recently gathered to discuss how to regulate crypto assets and related service providers. While examining three key areas, they stressed the importance of international cooperation, citing that cryptocurrencies are global products.

FATF-Led Discussion on Crypto Supervision
The Financial Action Task Force held a "supervisors' forum" in France last week to discuss crypto asset supervision. The aim of the forum was "to promote more effective supervision by national authorities" in the area of crypto assets and related service providers. The FATF is an intergovernmental organization with a focus on developing policies to combat money laundering and terrorism financing. Supervisors are designated authorities or non-public bodies with compliance responsibilities of each country.

According to the FATF, this event was the first opportunity for regulators to discuss how to implement new measures for crypto assets and related service providers since it finalized them in June 2019. Attendees included 135 representatives from over 50 delegations involved in virtual asset supervision, the FATF detailed, elaborating:

Supervisors play an important role in ensuring that regulated entities, such as banks and financial institutions, implement the FATF's standards to detect and prevent money laundering and terrorist financing.

3 Key Areas Discussed
The event's participants shared their knowledge and experience in supervising and regulating virtual assets and virtual asset service providers (VASPs). They discussed three main topics, starting with the lessons learned so far from countries that have already established a regulatory framework for cryptocurrencies and VASPs.

The second topic concerns common issues when drafting VASP laws and regulations. Representatives shared their approach to developing an AML/CFT regime for VASPs in their jurisdictions and outlined how they were implementing the FATF's recommendations. The third topic discussed was about the tools, skills, procedures, and technology needed to effectively supervise VASPs. The FATF remarked:

The importance of international cooperation was also highlighted, as virtual assets are inherently global products.

The supervisors and regulators identified a number of areas that need further action which they plan to discuss at the next FATF Plenary and other supervisors' meetings to be held in May.

Implementing the FATF Standards
The supervisors' forum is an initiative of the Chinese Presidency of the FATF to promote more effective supervision by national authorities. Two have been held so far, the first of which was held in November 2019 in Sanya, China. It focused on the effectiveness of supervision without discussing crypto assets.

The FATF's explanation from its crypto guidance.
The FATF issued guidance for crypto assets and VASPs in June 2019, with the support of the G20 countries. The money-laundering watchdog subsequently revised its assessment methodology. It sets out how the FATF will determine whether countries have successfully implemented its recommendations and are regulating the crypto sector. The FATF's rules apply both when cryptocurrencies are exchanged for fiat currencies and for other digital assets.

The challenge now is for countries and affected entities to effectively implement its recommendations, the FATF affirmed. By bringing together practitioners from around the world, the organization explained that it "is beginning to develop a global knowledge base on 'what works' in supervising virtual assets," adding:

This will help ensure a consistent global approach to supervision and will help the VASP sector adjust to the new regulatory environment.

A FATF meeting.
While acknowledging that implementing its requirements will be challenging for the crypto sector, the FATF believes that "it will ultimately increase trust in blockchain technology as the backbone behind a robust and viable means to transfer value." Noting that adopting its rules will "ensure transparency of virtual asset transactions and keep funds with links to crime and terrorism out of the cryptosphere," the money laundering watchdog declared:
Countries need to implement the FATF's measures, and soon … The FATF will evaluate next steps in June 2020.

CabbageTech founder sentenced to 33 months in prison



Patrick McDonnell has been sentenced to 33 months in prison by a New York court. The founder and CEO of CabbageTech Corp., a fraudulent crypto trading company, entered a guilty plea last year for defrauding investors. The court also ordered him to pay back the money he defrauded his investors.

McDonnell was first arrested in March last year and charged with fraud. The Staten Island, New York resident was the mastermind behind CabbageTech, otherwise known as Coin Drop Markets, a company he touted as a crypto advisory and trading firm. He posed on social media platforms as an expert trader, promising to make his investors huge profits if they invested with his firm. However, he channeled most of the investment into his personal use.

Following his arrest, McDonnell pleaded guilty to wire fraud. And now, Judge Nicholas G. Garaufis has sentenced him to serve 33 months in prison for his crime. He will also have to pay $224,352 in restitution to his investors.

The U.S. Attorney for the Eastern District of New York Richard Donoghue, who led the prosecution, sounded a warning to other crypto scammers. He stated, "Patrick McDonnell is headed to prison for deceiving investors, using an alias, false promises and false balance statements for one purpose only—so that he could steal their money. This Office will continue to vigorously prosecute white-collar criminals who defraud the investing public."

McDonnell conducted his scheme between November 2014 and January 2018, the Department of Justice revealed in its press release. He promised his investors that he would offer trading advice and even trade cryptos on their behalf. He ended up doing neither, and instead, he published false financial statement indicating a thriving business. He ended up collecting $194,000 in fiat, 4.41 BTC, 2016 Litecoin, 620 Ethereum Classic and 1.3 million Verge tokens for a total of $224,350.

The Commodities Futures Trading Commission has been instrumental in the McDonnell case, having been the first agency to investigate him. The Commission requested the court to treat cryptos as commodities for this particular case, giving it jurisdiction over the proceedings. McDonnell had argued that the CFTC had no authority to regulate his business, an argument that the judge rejected, ordering him to pay $1.1 million – $290,000 in restitution and $870,000 in penalties.

New York wants crypto companies to pay their own way



New York has a love/hate with cryptocurrency. It's the only state that requires companies in the industry to obtain a separate license, the BitLicense, to operate, while recognizing that digital currency is legitimate. There is even talk of the state issuing its own quasi-crypto, minus the decentralization, and Gov. Andrew Cuomo now believes that companies should take a more vested interest in their activity if they want to operate within the state's borders. Cuomo has proposed changes to New York's Financial Services Law (FSL) that would require those entities to cover all expenses related to regulation and licensing.

In Cuomo's State of the State (in pdf) plan, he explains that there are gaps in the oversight of companies licensed under the Bank Law and Insurance Law, and those covered by the FSL. Entities covered by either of the first two are obligated to provide payments to the New York Department of Financial Services (NYDFS) to cover their regulatory costs, but this isn't the case for those covered by the FSL. The governor wants to amend the FSL in order to close these gaps.

While the plan doesn't specifically mention cryptocurrency businesses, they're regulated by the NYDFS and the FSL. This can only mean that they would be subject to the same regulations as any other entity under the FSL's guidance.

No mention is made about how much any costs would be, or when the plan might be put into action. Nor does it indicate if businesses already licensed would have to pay any retroactive fees, or if they would automatically be grandfathered into the policy. The governor's office is now accepting public comments on the proposals, with any input expected on or before January 27.

Several lawmakers in New York, along with a law professor from Cornell, have introduced a plan that would see a statewide digital currency become active. Dubbed "public Venmo," the project would introduce an electronic banking platform and a digital currency that would be available for use across the state.

According to Vice, Public Venmo is the brainchild of Senator Julia Salazar, Assemblyman Ron Kim and Cornell law professor Robert Hockett. Kim explains, "I believe that our proposal, the Inclusive Value Ledger, has the potential to be truly revolutionary," Kim said in a public statement. "The creation of a free public savings and payment platform that all New Yorkers can use, not only to pay for goods and services but also to transfer money directly to each other through, could fundamentally reshape New York into a fairer, healthier, wealthier, and more inclusive place for all."

As opposed to other digital currencies, Venmo wouldn't be completely decentralized. It would be issued, monitored and regulated by a central government-led entity that maintains a government-controlled master wallet.

IMF Helping Philippines Become Important Crypto Market


The International Monetary Fund (IMF) is providing the Philippines with technical assistance regarding crypto assets. The IMF believes the country may become an important crypto market and has provided the Bangko Sentral ng Pilipinas with suggestions for the country's crypto regulation, including quarterly data collection from approved crypto exchanges.

IMF Helping Philippines' Central Bank
The International Monetary Fund published a 34-page Technical Assistance Report on the Philippines this week as part of its periodic consultation with the country's regulators. The report and recommendations within it are based on an assessment the IMF staff conducted in July. The contents of the report constitute technical advice provided by the IMF staff to the authorities of the Philippines in response to their request for technical assistance, the report details.

The IMF is also helping the Philippines' central bank, the Bangko Sentral ng Pilipinas (BSP), in several areas to improve the quality of monetary and financial statistics compiled by the central bank. "At BSP request, the mission also delivered a lecture on the treatment of crypto assets in macroeconomic statistics," based on the latest methodology released by the IMF's Statistics Department, the organization detailed. Emphasizing the growing number of crypto exchanges approved by the BSP, the IMF asserted:

The Philippines may become an important market for crypto assets.
The BSP adopted a formal crypto regulatory framework through the issuance of Circular No. 944 in 2017. Businesses engaged in the exchange of cryptocurrencies for fiat money in the Philippines are required to register with the central bank as remittance and transfer companies.

IMF Encourages the BSP to Collect Data From Crypto Exchanges
According to the BSP's most recent list, there are currently 13 approved crypto exchanges in the Philippines. They are Betur dba Coins.ph, Rebittance, Bloomsolutions, Virtual Currency Philippines, Etranss Remittance International, Fyntegrate, Zybi Tech, Bexpress, Coinville Phils, Aba Global Philippines, Bitan Moneytech, Telcoin, and Atomtrans Tech.

The IMF report also notes that "The mission encourages the BSP to start exploring the possibility of collecting data on these exchanges for macroeconomic analysis, in particular international financial flows using crypto assets," elaborating:

The mission suggests requesting aggregated data, on a quarterly basis, on gross transactions, indicating the country of origin and destination of the funds transacted.

"In addition, it would be useful to breakdown the parties involved in the transactions between individuals, financial corporations, and nonfinancial corporations," the staff advised.

The suggestions by the IMF are similar to the recommendations by the Financial Action Task Force (FATF), an intergovernmental body responsible for developing policies to combat money laundering. The FATF issued guidance on a risk-based approach to virtual assets and related service providers in June. It urges countries and obliged entities to design customer due diligence processes to meet both the FATF standards and national legal requirements. Its recommendations include "identifying the customer and, where applicable, the customer's beneficial owner and verifying the customer's identity on a risk basis and on the basis of reliable and independent information, data, or documentation to at least the extent required by the applicable legal or regulatory framework."

Huobi Japan to raise another $4.6M in January 2020




Huobi Japan, the Japanese subsidiary of Singaporean crypto giant Huobi Group, is set to raise $4.6 million in January 2020. The exchange will raise the funding from Japanese financial services firm Tokai Tokyo Financial Holdings. The new funding comes just two months after the exchange raised another $4.6 million from FPG Corporation.

Tokai Tokyo signed a business alliance agreement with Huobi Japan which will see the two firms strengthen cooperation in the digital assets business. The financial services giant, which mainly deals in brokerage services, believes that blockchain and cryptos are about to explode in the Japanese market and it doesn't want to miss out.

In its press release, the company stated, "Here in Japan, the relevant ministerial ordinances are expected in force next spring. Therefore, we believe that the business dealing with crypto assets and blockchain will accelerate further."

Tokai Tokyo will promote new businesses in areas such as initial exchange offerings, crypto exchange, local currency issuance and the storage and management of cryptos. The firm will "consider expanding this business to partner regional banks in the future."

Huobi Japan was launched in January 2019. This was after Huobi Group acquired local crypto exchange BitTrade in September 2018, rebranding it into its Japanese subsidiary.

In October, the company raised ¥500 million ($4.6 million) through the issuance of new shares to FPG Corporation, a Japanese financial services group. The exchange pledged to channel the funds to expansion, staying true to their promise that they would 'aggressively scale up their platform.'

While Huobi Group has found great success in Japan, its push into the United States hasn't been as smooth. Last month, the exchange announced that it was set to freeze all U.S. accounts in a few weeks' time. The freezing followed months of gradual disabling of U.S. accounts as regulatory scrutiny mounted. Users were urged to withdraw their funds before November 13 or risk losing them.

Earlier this month, its U.S. subsidiary HBUS announced that it was halting operations. HBUS was around for just over 18 months before calling it quits. In more positive news however, Huobi has continued to expand into other territories including Thailand and Argentina.

Why Quantum Computing’s Threat to Crypto May Be Further out Than Previously Thought



According to one researcher, quantum computing faces more hurdles than many realize when it comes to achieving viability in breaking encryption. In a recent report Dr. Subhash Kak, Regents Professor of Electrical and Computer Engineering at Oklahoma State University, notes that there are issues such as "noise" and error correction that render the buzz about quantum supremacy when it comes to Bitcoin, still largely theoretical.

Where Quantum Supremacy Falls Short
In essence "quantum supremacy" refers to the demonstration that a quantum computer can solve some problem classical computers can't. There's no doubt this has been done, but the important question for those in the crypto space centers on what kind of problem is being solved. While the development of quantum supremacy is a haunting specter indeed for hodlers worried about their private keys, there's yet little evidence the problems being solved by this technology have much utility in cracking encryption where cryptos are concerned.

"These companies are trying to build hardware that replicates the circuit model of classical computers. However, current experimental systems have less than 100 qubits. To achieve useful computational performance, you probably need machines with hundreds of thousands of qubits," states Dr. Subhash Kak in a recent article.

Though groups like D-wave boast 2000 qubits (quantum bits) the applications are different. D-wave's focus is on optimization via a process called quantum annealing which, according to Kak, is a "narrower approach to quantum computing … where qubits are used to speed up optimization problems." As such, D-wave's claims have garnered some criticism, with one recent report on the topic calling the D-wave system "skim milk" compared to other computers.

Noise and Error Correction
The real difficulty in achieving practical quantum code-cracking resides in the concepts of noise and error correction, according to Kak. The researcher details:

"For computers to function properly, they must correct all small random errors. In a quantum computer, such errors arise from the non-ideal circuit elements and the interaction of the qubits with the environment around them."

For these reasons the qubits can lose coherency in a fraction of a second and, therefore, the computation must be completed in even less time. If random errors – which are inevitable in any physical system – are not corrected, the computer's results will be worthless.

This error correction complicates things even more. The potential for noise-related errors necessitates the need for more qubit power. Theoretical physicist Mikhail Dyakonov describes the mind-boggling nature of the problem, saying:

"While a conventional computer with N bits at any given moment must be in one of its 2N possible states, the state of a quantum computer with N qubits is described by the values of the 2N quantum amplitudes, which are continuous parameters (ones that can take on any value, not just a 0 or a 1). This is the origin of the supposed power of the quantum computer, but it is also the reason for its great fragility and vulnerability.

So the number of continuous parameters describing the state of such a useful quantum computer at any given moment … is much, much greater than the number of subatomic particles in the observable universe.

In other words, the strength of practical quantum computing can also be seen as its Achilles heel. Because it can process so many variables, these seemingly endless variables also open the door for greater potential error. Resulting hardware and logistical considerations are not as often discussed as other issues, but according to the two researchers these areas are of critical importance.

Looking Past the Hype
Dyakonov, like Kak, points to the hype surrounding the field of quantum computing, which has been in development and a source of energized speculation for decades. While it is unclear exactly how far classified government and high-level scientific developments may have come by now, as far as the educated observer can tell, it seems there's a long way to go before the Bitcoin network may be in danger. At which point algorithmic upgrades have been suggested by many as a potential solution.

Still, like ongoing work in nuclear fusion, quantum computing is not to be ignored. An unforeseen breakthrough could theoretically happen at any time and change the game. Kak, for his part, remains skeptical: "As someone who has worked on quantum computing for many years, I believe that due to the inevitability of random errors in the hardware, useful quantum computers are unlikely to ever be built."

US turns to CoinMarketCap for help assessing seized cryptos’ value



When it comes to stopping illicit activity, law enforcement departments have an easy task assigning values of confiscated items and cash. Confiscate euros or yen, and there is an established conversion rate that can be used to determine the value in dollars, for example. However, seizing cryptocurrency assets is a different story, as there is no one standard on the conversion rate. Different exchanges provide different rates, although many are fairly closely aligned. To create a standardized form of value assignment to crypto, the U.S. Department of Justice (DOJ) is turning to a familiar source for its data. The DOJ's Office of Inspector General acknowledges that CoinMarketCap is its go-to destination when it wants to know how much 20 BTC is worth in dollars.

According to a report (in pdf) just released by the OIG, "Audit of the Assets Forfeiture Fund and Seized Asset Deposit Fund Annual Financial Statements Fiscal Year 2019," it describes forfeited property as that for which the title to the property has been passed to the government. When received, the estimated market value at that time is recorded, and then adjusted "at the time of disposal, or as need by AFP [Asset Forfeiture Program] management."

To determine that value, a particular "valuation documentation" source is used – for vehicles, it can be the National Automobile Dealers Association or Kelley Blue Book, and for real estate, it is the established Broker's Price Opinion. For financial instruments, the source is web-based valuation tools and financial markets, and, specifically for digital assets, CoinMarketCap.com.

In many cases, the valuation can be determined by other sources "in accordance with agency policy," which means that CoinMarketCap may not be the only place where crypto values are gleaned. However, at least everyone knows that there is a marker used by the DOJ to consistently provide value to the assets it confiscates.

CoinMarketCap is already popular with a lot of crypto enthusiasts in order to gauge token values. The exchange has had some issues in the past with the way the data has been accurately portrayed, but has apparently cleaned up its act. This past August, it introduced new liquidity rankings as a way to, hopefully, better supply the real value and eradicate the entire valuation system of fake data. 

Crypto bank SEBA expands to nine new jurisdictions



Cryptocurrency-focused banking startup SEBA Crypto AG has expanded into nine new jurisdictions, just months after it received a Swiss banking license. With its latest expansion, the startup aims to bridge the gap between digital currencies and the legacy banking system.

Based in the Zug crypto valley in Switzerland, SEBA aims to offer the crypto industry with the banking services that it has lacked for so long. It obtained a Swiss banking license in August and became fully operational a month ago.

In a statement shared with media houses, the company revealed that it had expanded into nine new jurisdictions. These are Hong Kong, Italy, Singapore, France, Germany, Austria, the Netherlands, the U.K and Portugal.

For SEBA, it's all about bridging the gap between the traditional financial system and the new era of digital currencies. As CoinGeek has reported severally, crypto companies have struggled to access even the most basic banking services. For banks, it doesn't matter how big the company is or how much revenue the bank stands to lose, as has been seen with the Bitfinex banking debacle.

In its statement, SEBA criticized the great discrepancy that exists between legacy financial institutions and the crypto industry, stating, "More than 10 years after the invention of Bitcoin, there is still a tremendous gap between traditional banking on one side and decentralized finance on the other side."

SEBA provides several products to its clients, starting with the most basic bank account needs. It'll also allow its clients to tokenize all forms of assets, from real estate to investment products. It also offers an e-wallet alongside its SEBA card. Its services allow its clients to manage five cryptos currently, among them Ether, Litecoin and Stellar. They can easily exchange these cryptos into fiat on SEBA's platform, and vice versa.

As we reported previously, SEBA's promising future has pooled in investors, allowing it to raise $100 million in its most recent funding round. At the time, the startup's CEO Guido Buehler reiterated that its mission is "to become a market leader in the convergence of traditional finance with the crypto economy."

Quadrigacx Founder Dead or Alive? Request for Exhumation and Autopsy Filed



The founder of now-defunct crypto exchange Quadrigacx may still be alive, even though he supposedly died in India about a year ago. A court-appointed law firm is seeking an answer on behalf of affected users. The firm has requested an exhumation and post-mortem autopsy in Canada of the body of Gerald Cotten, as some 76,000 users are still out millions of dollars.

Exhumation and Post-Mortem Autopsy
Law firm Miller Thomson has sent a letter to the Royal Canadian Mounted Police regarding Gerald Cotten, the late founder and CEO of bankrupt Quadrigacx crypto exchange. The firm was appointed by the Supreme Court of Nova Scotia as representative counsel on behalf of users affected by the shutdown of the exchange. In its letter dated Dec. 13, the law firm wrote:

The purpose of this letter is to request, on behalf of the affected users, that the Royal Canadian Mounted Police (the 'RCMP'), conduct an exhumation and post-mortem autopsy on the body of Gerald Cotten.

The letter explains that the aim of the request is "to confirm both its identity and the cause of death given the questionable circumstances surrounding Mr. Cotten's death and the significant losses of affected users."

Along with the letter, the law firm sent some background material to the police consisting of publicly available information on the history of the exchange, the supposedly dead founder, and other related materials. The firm emphasized:

In our view, further highlight the need for certainty around the question of whether Mr. Cotten is in fact deceased … Representative counsel respectfully requests that this process be completed by Spring of 2020, given decomposition concerns.

Suspicious Circumstances
Since the reported death of Cotten in December 2018 due to complications relating to Crohn's disease while on honeymoon with his wife in Jaipur, India, there has been much speculation about what actually happened. Many people believe that the 30-year-old is not dead as circumstantial evidence continues to rack up against him. A Vanity Fair article published on Nov. 22 points out a number of theories and evidence surrounding the case, including the exchange's co-founder, Michael Patryn, turning out to be a convicted fraudster.

Gerald Cotten, supposedly dead founder of bankrupt Quadrigacx crypto exchange
Cotten's death was announced a month after he presumably died while his exchange continued to accept customer funds. The private hospital in India misspelled his name and the doctor later said that they were not sure about the diagnosis. By the time his death was made public, about 76,000 individuals could not access their funds totaling approximately $190 million. Cotten was also supposedly the only person with the private keys to the exchange's cold wallets. However, court-appointed monitor Ernst & Young and several blockchain investigators found that the exchange's crypto wallets were empty, and some funds were transferred to Cotten's personal accounts or other exchanges. The company began bankruptcy proceedings in Nova Scotia in April, which were moved to Toronto earlier this year.

Both Canada's tax authorities and the U.S. Federal Bureau of Investigation (FBI) are investigating Quadrigacx. On June 2, the FBI posted a notice on its website seeking victims in the investigation. Some people interviewed by the RCMP and the FBI said they got the impression that the agencies believe that Cotten might not be dead, explained the Vanity Fair article. One of the witnesses questioned by both agencies said:

They asked me about 20 times if he was alive … They always end our conversations with that question.

IMF wants Georgia to reform its accounting of crypto industry


Georgia is currently ranked fourth in digital currency production from crypto mining, and they are home to Bitfury, one of the biggest Bitcoin mining companies in the world. However, despite being among the largest producers of cryptocurrencies, Georgia's income from cryptocurrency-related activities such as mining and trading are not reflected in their trade balance reports.

To address this, the International Monetary Fund (IMF) has reportedly suggested that Georgia include the income from cryptocurrency-related activities in their annual foreign trade balance reports since a significant percentage of their economy consists of crypto mining and trading.

The IMF recommends Georgia to be more transparent when accounting for crypto mining. Georgia's income from cryptocurrency production despite being among the highest in the world is still unknown. The IMF had already met with large crypto mining companies and advised them to take records of their sales of cryptocurrencies to foreign parties. Since their locally-mined cryptocurrencies are sold to foreign entities, this activity can be considered a form of export, and thus must be accounted for to uphold transparency further.

The organization is currently working closely with Georgia on improving statistics and methodologies for calculating the trade balance, as well as discussing the introduction of accounting in the activity of crypto mining. These new insights will aid Georgia in accounting for their crypto-related income to address the IMF's request for transparency.

 Because cryptocurrency mining comprises a fair portion of Georgia's economy, the IMF believes that the country's government must acknowledge the industry.

IMF Deputy Division Chief Mercedes Vera-Martin stated that the sale of cryptocurrency in large amounts to foreign buyers must be accounted for in the country's international trade balance. Similar to their exportation of copper ore, Georgia must recognize the income generated by their exported digital currencies and record this income so that it may be reflected in their foreign trade balance.

The National Bank of Georgia reported that the total number of digital wallets registered in the country in the last year amounted to 5,300, which had an equivalent of $708,000. As a measure to further gauge the significance of cryptocurrency in the country, the IMF suggested that The National Bank of Georgia determine the number of digital wallets and its corresponding monetary equivalent of non-residents in Georgia. Additionally, the IMF created a questionnaire for the country's government that aims to determine the amount of Bitcoin produced and sold to foreign buyers.

Cryptocurrency mining requires large amounts of power. In a BBC podcast, David Chapashvili of Green Energy said crypto mining consumes more than 10% of the total electricity produced by the country, as Bitfury alone already consumes about 4% of the country's power. The country's cheap hydro-electricity has attracted many crypto miners. As a result of the large-scale mining operations, there have been instances of power outages that have affected many of the country's residents.

The significance of determining the country's income from cryptocurrency export lies in its national accounts statistics. Georgia imports equipment such as application-specific integrated circuit devices for mining, which is reflected in their trade balance, while their export of digital currencies is left out. The country's foreign trade balance reports become inaccurate, as imports are recorded and accounted for, while exports are not, which ultimately led the IMF to suggest its recommendations to the country.

Minery CEO on why Siberia is the perfect location for crypto mining


Cryptocurrency mining has shifted over the years as miners seek the regions with the best conditions and the least costs. Ilya Bruman has managed to find one: Siberia, a vast region in Russia and Northern Asia. During the Baikal Blockchain Summit, he spoke to CoinGeek's Becky Liggero and explained why Siberia is the ideal location for miners and how his company has managed to find great success in crypto mining.

Minery is a cryptocurrency mining company based in Siberia, an extensive province that spans most of Northern Asia. It allows its clients to engage in crypto mining without the hassle of buying and maintaining the equipment.

Siberia is an ideal location for crypto mining, Bruman stated. One of the reasons for this is the low cost of electricity. The average cost of electricity in the region is $0.0032 per kWh, way lower than other regions globally. Minery relies on hydroelectric power generated by the Bratsk Electric Grid Company, JSC (BEGC).

The second reason is the temperature in Siberia. Bruman explained:
The other reason is climate. The average temperature is –2°C per year. So it's quite cold and we spend less money to cool the equipment.

Minery has been successful so far, boosted by the good recommendations it gets from its satisfied clients. The company has some of the lowest charges, with an uptime of 99.9%.

"And this is the main thing in mining; the uptime of the equipment, how much the equipment works, because soon as the equipment stops working, you start losing your money. And the clients know that we're stable, so they just tell their friends," Bruman stated. "Actually, we don't do any advertisement."

BTC and BCH have historically been the most popular cryptos with Minery's clients. However, in the past year, many miners have shifted to BSV, Bruman said. Other cryptos such as LTC and ETH have a small minority of miners.

Despite having a financial background, Bruman believes that this is the best field to be in as the world shifts to digital currencies. "The future is digital money," he concluded.
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