Day: April 17, 2018

As part of an effort to protect cryptocurrency investors and bring greater transparency into how cryptocurrency exchanges operate, New York Attorney General Eric Schneiderman has sent letters to 13 virtual currency exchanges requesting they disclose key information about their operations.

“With cryptocurrency on the rise, consumers in New York and across the country have a right to transparency and accountability when they invest their money,” the attorney general said in a statement today, April 16, 2018. “Yet too often, consumers don’t have the basic facts they need to assess the fairness, integrity and security of these trading platforms.”

The letter was part of a “Virtual Markets Integrity Initiative” launched by Schneiderman to shine a light on the policies and practices of platforms used by consumers to trade virtual currencies and initial coin offering (ICO) tokens.

A Slew of Questions

In addition to the letter, the attorney general sent a three-page questionnaire to Coinbase, Gemini, Bitfinex, Poloniex and nine other exchanges asking them to disclose, among other things, information such as what banks they use, how they hold customer funds, what fees they charge, how they come up with those fees, how they move funds around, who has access to the order books, and the scope of third-party audits.

Gemini, an exchange operated by the Winklevoss twins, told Bitcoin Magazine, it “applauds” the attorney general’s initiative and looks forward to submitting its responses to the questionnaire.

As the price of bitcoin crossed $10,000 for the first time in November 2017, reaching a peak of over $19,700 a few weeks later, a rush of new traders began entering the market. But, as many have learned the hard way, putting funds on exchanges comes with its own set of risks. Outside of the U.S., this year alone, Coincheck in Japan lost $530 million worth of NEM (XEM) in a hack; BitGrail, an Italian exchange, lost $170 million worth of Nano (XRB); and Coinsecure, an exchange in India lost $3.5 million in bitcoin (BTC).

Tough Times Ahead

In the U.S., cryptocurrency regulation is becoming a tough web to untangle for companies trying to do business in the space. Not only do cryptocurrency businesses and virtual exchanges have to deal with federal regulators like the Securities and Exchange Commission, Financial Crimes Enforcement Network and the Commodity Futures Trading Commission, but they also have to contend with regulators in each of the 50 states.

Stephen Palley, a lawyer in Washington D.C., known for his work in the crypto space, says he is not surprised to learn of the New York attorney general’s initiative. At the same time, he views it as a grim sign of what is to come. “This is just the start. There will be a major onslaught. It will shut down or shut out a bunch of exchanges from the U.S.,” he told Bitcoin Magazine.

In a tweet, Palley referred to Schneiderman as an “activist” and noted,“Being in his crosshairs isn’t a great thing.”

International insurance broker Marsh is working with IBM to develop a commercial blockchain solution that will allow businesses to certify that the contractor they are about to hire has the proper, up-to-date insurance coverage necessary to begin work.

The solution will be built on Hyperledger Fabric, an open-source permissioned blockchain framework, using IBM Blockchain Platform, a cloud-based blockchain application development solution, Marsh said in a statement yesterday, April 16, 2018.

Insurance standards organization ACORD will provide input on the project, and Dallas-based ISN Software Corporation, which supplies contractor and supplier management services, will be the first client to use the new solution.

Marsh is aiming to solve an important problem. Businesses often hire contractors, vendors and other third parties to work for them or provide services, but before doing so, they need to know that the vendor has proper liability insurance, so the business is covered in the event something goes wrong or a vendor performs substandard work.

Typically, a client will request a certificate of insurance (COI), also known as an ACORD certificate, which is a document that has all the information on it to show a client has up-to-date insurance coverage. The problem with PDFs or paper documents is they can be faked. Documents can can also get misplaced, lost or damaged.

Blockchains, on the other hand, are nearly impossible to tamper with. By putting proof of insurance on the blockchain, parties that need evidence of insurance can ideally trust the coverage is up to date and historically correct. Marsh said it expects its blockchain solution to allow clients to speed up necessary business functions such as hiring contractors and transferring risk, while increasing coverage certainty.

“Marsh sees great opportunity in leveraging blockchain technology to better serve our clients by maximizing efficiency and creating new opportunities in the insurance value chain,” said Sastry Durvasula, chief digital officer at Marsh.

Sandip Patel, general manager, insurance industry, at IBM, believes that simplifying the insurance verification process is a key business enabler. “This is an ideal example of how blockchain can be used on a much broader scale to drive real business results,” he said.

Currently in the pilot stage, Marsh’s new blockchain network is expected to go into production later this year. ISN will be the first Marsh client to try out the solution, putting its contactors’ policies on the ledger for hiring businesses to check.

“The insurance industry has been dependent on paper certificates of insurance, manually populated by an insurance agent,” said Brett Parker, technical insurance lead, at ISN. “By digitizing the policy information, we can streamline the process saving our customers time to focus on their core competencies.”