Weekly Update

TFU | Feb. 19-25

The CFTC and FCA set up a transatlantic fintech agreement; Fed’s Dudley warns about crypto “speculative mania”; Zelle is dealing with fraudsters; Circle acquires Poloniex; and Bitcoin mining is becoming big business.

Leading Off

The CFTC and FCA made a transatlantic agreement to support fintech innovation in the U.S. and U.K.; the New York Fed’s William Dudley warned against the “speculative mania” of cryptocurrencies; Zelle is dealing with fraudsters on its network; firms offering computing power to Bitcoin miners are growing as mining costs continue to rise; AI experts published a paper on potential security threats from malicious use of AI; and Circle will acquire Poloniex, putting it on track to compete with large crypto exchanges like Coinbase.

In the News

FCA and CFTC establish fintech partnership.  The U.K. Financial Conduct Authority (FCA) and the U.S. Commodity Futures Trading Commission (CFTC) announced [press release] that their in-house fintech initiatives will collaborate to support innovation and product development among U.S. and U.K. fintech firms seeking to “scale and expand internationally.”

Dudley warns of crypto “speculative mania.” New York Federal Reserve President William Dudley warned virtual currency investors that valuations are at “pretty dangerous” levels. Dudley has “appeared to ramp up central bankers’ warnings on [cryptocurrencies] . . . after months of heavy volatility and frenzied activity,” noted the Wall Street Journal.

Zelle faces threats from scammers.  Users of the bank-backed P2P payments service have reported a rise in fraud, including some scams resulting in losses of thousands of dollars. A common tactic is for scammers to ask payers to use Zelle instead of PayPal — suggesting greater legitimacy — only to shut down their bank accounts and disappear after the payment has settled.

The market for Bitcoin is creating a market for Bitcoin mining.  The WSJ profiles Bcause, a startup with $5 million in Series A funding that rents computing time to clients engaged in Bitcoin “mining.” As the amount of computing effort required to mine a single coin continues to climb, firms are setting up “mining rigs” around the world to meet growing demand.

Experts publish paper on malicious use of AI.  Researchers at Oxford’s Future of Humanity Institute, Cambridge’s Center for the Study of Existential Risk, and 12 other institutions, argue that while AI technologies “have many widely beneficial applications” less attention has focused on how they can be used maliciously. The report [full text] surveys the potential security threats from AI, and suggests ways to better forecast, prevent, and mitigate these threats.

Circle to acquire Poloniex exchange.  The Boston-based international money-transfer service is expected to announce today that it is purchasing one of the world’s most active cryptocurrency exchanges. The purchase, rumored to be valued at $400 million, will “instantly make Circle a rising threat to Coinbase, the biggest cryptocurrency exchange in the U.S.”

Telegram seeks more funding, may not launch ICO in U.S.  The digital messaging service, which announced an $850 million fundraise last week, is reportedly working on another pre-sale for accredited investors as it aims for a $2 billion ICO in March. Meanwhile, the firm reportedly is considering making its ICO available only to non-U.S. investors to avoid a “regulatory tussle.”

Hackers used Tesla’s Amazon cloud to mine cryptocurrency.  Automotive company Tesla is the latest victim of “cryptojacking,” a growing threat in which hackers infiltrate a firm’s network and use its resources to mine cryptocurrency. Cybersecurity firm RedLock discovered the intrusion last monthPCGamer reports.

Andreessen Horowitz invests in Anchor Labs.  The Silicon Valley-based venture firm bought into cryptocurrency firm Anchor Labs, “a stealthy startup planning to provide digital asset custody.” Digital asset custody “is becoming the next big topic on the investment side of digital tokens” and is a critical requirement for institutional investors, according to Axios.

Forbes’ “Richest People in Cryptocurrency.”  The financial magazine published its first-ever ranking of the richest people in cryptocurrency, based on their estimated holdings and digital currency prices on January 19, 2018. The list includes the co-founders of Ripple and Ethereum, twins Cameron and Tyler Winklevoss, and Coinbase CEO Brian Armstrong.

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