Cloud Hosting

Mark Mobius is sensing danger in the explosive growth of cryptocurrencies.

Governments will begin clamping down on digital currencies because of their use in illicit financing, with terrorist groups to drug dealers contributing to their rise, Mobius, executive chairman at Templeton Emerging Markets Group, said in an interview in Hong Kong Monday.

Cryptocurrencies are beginning to get out of control and its going to attract the attention of governments around the world, Mobius said. Youre going to get a reversion back to gold because people are going to wonder, can I really trust these currencies?

And the crackdown may have already started -- at least in China, home to the majority of bitcoin miners.

The Peoples Bank of China said Monday that initial coin offerings are illegal and that all related fundraising activity should be halted immediately. The central bank said it has completed investigations into organizations and individuals who have conducted so-called ICOs, and have ruled that such activities disturb financial order and will be banned.

In the U.S., both banks and regulators are studying distributed ledger technology. Federal Reserve officials have made a couple of formal speeches on the topic in the past 12 months, but have voiced reservations about digital currencies themselves.

Mobius isnt the only one voicing concern. Bank of America Merrill Lynch was cautious around bitcoin in July, saying there were a lot of obstacles, such as theft and hacking risks, that make it unlikely it will gain the status of pledgeable collateral.

Read more: Some Investors See Bitcoin Better Than Gold, Morgan Stanley Says

Bitcoin fell more than 10 percent on Monday, after news of the PBOC curbs. While the cryptocurrency is still up more than 360 percent this year and is still within striking distance of its record, its also prone to wild swings. Bitcoin surpassed the price for an ounce of gold for the first time in March.

Investors have poured hundreds of millions of dollars into the digital currency market this year alone, with the dollar value of the 20 biggest cryptocurrencies around $150 billion, according to data from Coinmarketcap.com.

People need a means of exchange and they need to trust that, said Mobius, who was interviewed before Chinas announcement. Right now the trust is good -- with bitcoin people are buying and selling it, they think its a reasonable market -- but there will come a day when government crackdowns come in and you begin to see the currency come down.

With assistance by Shery Ahn, and Angie Lau

Read more:
Mobius Foresees Cryptocurrency Crackdown Sparking a Rush to Gold - Bloomberg

Get Trading Recommendations and Read Analysis on Hacked.com for just $39 per month.

Cryptocurrency mining has become an important source of income inVenezuela, a country ravaged by hyperinflation, but it has also become hazardous as police are cracking down on people they suspect of using too much electricity.

Venezuelans have turned to cryptocurrencies as inflation has ravaged the official bolivar, which has lost 99.4% of its value since 2012. As a result, mining has become more lucrative, and a way for people to earn money to pay for basic living expenses,according to CNBC.

One miner, who agreed to speak only anonymously, became a miner because his $43 monthly salary couldnt support his family. He began mining illegally by using government computers where he worked, and eventually quit his government job to mine at home.

Another miner who has since fled to the U.S. said mining kept him out of poverty in Venezuela. He said one mining rig will produce enough income to feed a family.

Another woman who works three jobs said mining produces 80% of her $120 monthly income. She said mining has allowed her to support herself and her daughter.

One man said the easiest way to acquire commodities in Venezuela is to use cryptocurrency to buy things on purse.io. He said he orders staples like soap and deodorant and has a courier deliver them to his office.

Miners often turn to online forums to learn how to mine.

Also read: Venezuelan authorities destroy bitcoin mining center as crackdown continues

While mining has become a necessity to many, it has also become dangerous since it is illegal and police arrest people they suspect of using too much electricity. Subsidized electricity in Venezuela keeps the cost of mining down, but the government monitors its use carefully.

In 2016, two men in Valencia were arrested on charges of energy theft and possessing contraband. Since then, arrests have increased. One police official said the offenders are exploiting resources without documentation. A Reddit post said miners in the country are being arrested and charged with terrorism, money laundering and other crimes.

One 23-year-old who said he earned $20 a day mining Ethereum when the currency was at its price peak said he lives in fear of being arrested. Another miner said he was approached by intelligence officials who asked him why he was consuming so much power from his home. He said he moved to another location.

Still another miner said he conceals his electrical footprint by splitting his mining equipment across three locations. He pays neighbors to use their electricity for his mining.

Joe Lubin, Ethereum co-founder, said cryptocurrencies, despite their volatility, are integral to survival in places where natural currencies are spiraling out of control.

Featured image from Shutterstock.

See the rest here:
Venezuela Cracks Down On Cryptocurrency Mining - CryptoCoinsNews

Not too long ago, Chinese regulators voiced their concerns regarding cryptocurrency ICOs and the amount of money that companies have raised throughthoseevents. There is plenty of reason to be concerned overthe lack of regulation, asmost of these companies do not have a license to issue securities. It now appears the Chinese regulators are seeking to warn the public aboutthe risks pertaining to ICOs. They are advising the general public to report any suspicious ICO activity to the police. Things are not looking good for ICOs in China.

Various governments around the world have not taken too kindly to the concept of cryptocurrency ICOs. Given the hugeamount of money raised by projects without regulations or licenses in place, there is valid reason for concern. Some of these ICOs may pose a genuine risk to investors. Chinese regulators are very concerned about this way of raising a lot of money and want to address the hidden financial risks it presents.

According to Reuters, Chinese citizens are being asked to report suspected crimes to the police. In particular, theyare instructed to report any suspicious ICO activity to the authorities as quickly as possible. It is a bit unclear what would classify an ICO as being suspicious, since virtually every project will run into some issues along the way. Sites get hacked, information is leaked, or deadlines are not met. All of those events are suspicious in nature, although it is difficult to hold companies accountable for their actions (or lack thereof).

Chinese regulators are preparing new rules on digital currency offerings. It is certainly possible cryptocurrency ICOs mightbe suspended in China altogether until the new regulations are in place. No one knows for sure when that will happen exactly, though. Regulatory effortslike these can take anywhere from a few weeks to months or even years before they are fully implemented. With 65 ICOs organized in China to date and around US$400 million having been raised, these projects will face a lot of scrutiny from officials. They also highlight the dire need for proper ICO regulation in China and the rest of the world.

No one can deny these coin offerings have shaken up the financial industry quite a bit. They have disrupted the economic order and created relatively large hidden risks, according to a Chinese spokesperson. Those are some very serious comments which will hinder the growth of ICOs in China for the foreseeable future. Suspending suchfundraising efforts will have a similar effect. China is known for focusing on regulation first and foremost, even at the cost of stifling innovation a bit. The same issues have affected Bitcoin exchanges recently.

Similarly to Bitcoin, ICO tokens are a legal gray area for the time being. Over in the United States, a lot of these tokens may be labeled as securities, which couldspell disaster for companies conductingICOs in the past, present, and future. For the time being, it is unclear what the future will bring for cryptocurrency ICOs in China, but things are not looking all that great. If ICOs wereofficially suspended in the country, raising funds would become a lot more difficult, to say the least.

Suspending ICOs across China will be very difficult, though. Companies couldtry to prevent Chinese users from contributing money, but those measures wouldbe bypassed with relative ease. The same applies to projects barring U.S. investors, as all they do is introduce a short form and IP blocks. That block can easily be bypassed with a VPN or proxy connection, though. For the time being, raising funds with cryptocurrency is still somewhat legal in China, although things may change pretty quickly.

Follow this link:
Chinese Officials Contemplate Suspending Cryptocurrency ICOs - The Merkle