Digital Currency News Update: Warren Buffett Weighs in on Bitcoin
In this week's digital currency update, we're going to cover a range of global events. These stories include a Bitcoin crime story from Dubai, a regulatory update from the SEC, some regulatory news from Hong Kong, and investing guru Warren Buffett's take on Bitcoin.
Let's get started.
Warren Buffett Weighs In: Bitcoin Isn't Investing
Many digital currency investors are already familiar with Warren Buffett's stance on the world's first digital currency, Bitcoin. In short, he doesn't regard the digital token as an investment.
As Bitcoin's fame grew over the course of 2017, Buffett remained critical. His latest statements, made to Yahoo Finance on Saturday, April 28th, show that his attitude toward the digital token remains unchanged:
If you buy something like bitcoin or some cryptocurrency, you don't really have anything that has produced anything. You're just hoping the next guy pays more. There's nothing wrong with it. If you wanna gamble somebody else will come along and pay more money tomorrow, that's one kind of game. That is not investing.
Buffett's views on Bitcoin have been contradicted by other financial legends, including venture capitalist Tim Draper and billionaire investor Michael Novogratz.
Other people who have criticized Bitcoin include Robert Shiller and Jamie Dimon. Dimon incited a market pullback when he deemed Bitcoin "a fraud" in 2017.
That said, many of the top investors criticizing Bitcoin do believe in its underlying blockchain technology.
In his statement to Yahoo Finance, Buffett did not share his thoughts on blockchain technology, instead focusing his comments on cryptocurrency. Buffett's investing model is to buy strong businesses that are simple to understand and "hard to disrupt."
Utilizing AI, Dubai Police Track Down Gang Suspected of Stealing $1.9 Million in Bitcoin Heist
This week's Bitcoin crime story is a bit of a doozy.
In this story, digital currency plays a part without ever exchanging hands. Instead, the promise of Bitcoin was used as honey to draw new investors curious about the investment into a trap.
On March 29th, CoinTelegraph published a story about the police in Dubai arresting 10 members of a gang. Those gang members had used Bitcoin to lure potential buyers and then commit armed robbery.
The victims were two brothers who had been searching for ways to buy Bitcoin. The gang responded to their question, saying they could sell them Bitcoin. The two parties arranged to meet in an empty office that the gang gained keys to by pretending they were interested in buying the building.
Once the brothers were isolated from the outside, the gang assaulted them, robbing them at gunpoint for the equivalent of $1.9 million in USD.
The police were alerted to the crime the night it happened and quickly identified the gang leader. Within 48 hours, all members of the gang had been caught and the stolen funds had been recovered.
Major General Khalil Ebrahim Al Mansouri stated that smart programs and artificial intelligence technology were used to trace the gang.
This story highlights one of the dangers of the Bitcoin world: fake Bitcoin brokers.
Similar events to the one described above have taken place in other locations, including Russia and Singapore. Investors should always be wary about whom they buy from and shouldn't believe the promises of online crypto brokers if they are not a central exchange.
SEC Makes More Statements on Regulation: Open to ICOs but Cautious
On April 30th, in an interview with CNBC, U.S. SEC Commissioner Robert Jackson spoke about the Securities and Exchange Commission's continued work with initial coin offerings.
You can see the whole interview here. Below is our summary of some of the key points.
Jackson stated that the priority isn't shutting down initial coin offerings. Rather, the focus is on providing protection for investors who fall victim to the schemes and scams that exist within the space
Jackson emphasized that "investors are having a hard time telling the difference between investments and fraud."
Jackson's concern is a legitimate one. Because of the unregulated and technical nature of the digital currency market, many of the initial coin offering scams that took place in 2017 were able to win the trust of investors through valid-looking websites and promising language. There were no restrictions on their fundraising rounds. In these situations, and with so many initial coin offerings on the market, investors struggled to find real investment opportunities with long-term promise.
Jackson continued the interview with a positive outlook, stating: "Down the road, I think we will be thinking about ways to make those investments work consistent with our securities laws."
The interview follows the SEC's recent crackdown on digital currency companies. In the last couple months, the SEC has been issuing subpoenas for digital currency companies that launched initial coin offerings in 2017.
We will keep investors up to date on the regulatory situation as it evolves.
Hong Kong Government Report Says Bitcoin Poses "Medium-Low" Risk
A recent report released by the Hong Kong Financial Services and Treasury Bureau (FSTB) shed light on the role digital currencies play in both money laundering and terrorist financing. Many governments have been fast to accuse digital currencies of facilitating this kind of illegal behavior.
But the Hong Kong report concluded the contrary, saying virtual currencies were not being used heavily in either money laundering schemes or in terrorist financing.
This report did mention the role digital currencies play in cybercrimes, specifically the 2017 WannaCry attack. During the WannaCry attack, hackers used malware to target hospital systems and businesses around the globe. Those hackers then demanded payments in Bitcoin before removing the malware.
Initial coin offerings also earned their place in the report. The FTSB, Hong Kong financial regulators, and law enforcement agencies have agreed to come together to evaluate the risks associated with initial coin offerings.
The release of this report follows the Hong Kong's Securities and Futures Commission's (SFC) statement in February, which warned crypto investors that the agency would begin policing the digital currency and ICO market in 2018.
Cryptocurrencies are still not considered legal tender in Hong Kong.
Bonus News Feature: Is CoinDesk Actually Launching an ICO? NAW
CoinDesk got the final laugh this week by flaunting not only a fake new token, DeskCoin, but also a massive pre-launch party.
In an article on its website, CoinDesk invited investors and crypto enthusiasts to attend its pre-ICO launch party, which was supposedly taking place in Times Square. The invitation (which can be read here) cajoles investors with sarcastic promises of a "reefer room" and "healing EDM."
The mock ICO comes after CoinDesk's recent spat with Ethereum creator Vitalik Buterin. Leading up to this fight, Buterin accused CoinDesk of facilitating scam airdrops, further stating that this kind of behavior is why "pundits need to be replaced by prediction markets, ASAP."
But CoinDesk fired back posthaste, even using Vitalik's own statement in its mock ICO release.
CoinDesk concludes the article with the warning: “*Investors acknowledge that DeskCoin may or may not ever be released, but that despite this, it may trade on a number of exchanges.”
The digital currency world can be pretty weird, but this (clearly?) fake ICO from CoinDesk takes the cake.
Make sure to keep an eye on your inbox for our Monday article, where we take another look at Stellar and Ripple and talk about the future of cross-border payments.