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Geopolitical risks prevail as new players emerge in the crypto mining space

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Taras Kulyk, Senior Vice President of Blockchain Business Development at Core Scientific, says that the countries competing to become leaders in the Blockchain space vary greatly in what they can offer to crypto miners.

During an interview with Cointelegraph, Kulyk stated that global diversification of hashrate has been increasing as countries around the world vie for control of the crypto mining industry.

Kulyk believes that China has been a desirable hub for crypto mining due to specific factors it enjoys, specifically the low cost of labor, access to units, and decreased cost of power during the rainy season, but he clarified:

“One key economic concern driving recent crackdowns by authorities is theft of power which local politicians then have to clamp down. Another key economic concern driving regulatory uncertainty is capital control issues. Both of these have made the current regulatory environment in China uncertain for digital mining companies.”

Turmoil at the highest level of politics in any country or jurisdiction will likely cause the existing operators to reduce planned capital expenditure or worse, shut down and relocate, says Kulyk.

He pointed out that crypto mining “is extremely capital intensive, meaning that operators require stability over long periods of time to ensure their deployed capital recoups and provides an ROI.” He also warned that political unrest “can disrupt this much-needed stability.”

Kulyk noted how new regulations have impacted country-specific competitors such as Iran, Ukraine, Canada, and Kazakhstan:

“Generally, we’re seeing the regulatory burden for digital mining easing off, as it’s increasingly viewed as a way to reinvigorate sunset industry assets into being useful in the technology 2.0 economy. Governments are turning to their regulatory policy, particularly making their policy more favorable to mining, in order to gain competitive advantages over other players in the mining industry.”

As regulatory clarity emerges around crypto mining, Kulyk believes that “we’ll continue to see institutional investors allocate portfolio room to leaders in the space,” and concluded that:

“The stronger the leadership team and transparency around ownership and operations, the more likely a company will be a target for investors who are looking to get involved with digital mining.”



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ICO issuer charged with fraud by SEC for selling unregistered security

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The United States Securities and Exchange Commission, or SEC, has charged a cryptocurrency issuer for “making materially false and misleading statements” in connection with an unregistered security offering conducted between August 2017 and January 2018, offering further evidence that regulators were still targeting initial coin offerings from the last major market mania. 

Loci Inc., the platform behind LOCIcoin, and CEO John Wise were formally charged on Tuesday. The SEC claims that Loci and Wise misled investors about the company’s revenues, employee numbers and user base during the $7.6 million crowdsale. The regulator also alleges that Wise misused $38,163 in investor proceeds for personal expenses.

“Loci and its CEO misled investors regarding critical aspects of Loci’s business,” said Kristina Littman, the head of the SEC Enforcement Division’s cyber unit, adding:

“Investors in digital asset securities are entitled to truthful information and fulsome disclosures so they can make informed investment decisions.”

The order also requires that Loci and Wise pay a $7.6 million civil penalty for their transgressions.

Handing out penalties to cryptocurrency businesses is nothing new for U.S. authorities. Regulators from the SEC, Commodity Futures Trading Commission and Financial Crimes Enforcement Network have imposed fines of more than $2.5 billion on cryptocurrency-related businesses since 2014, underscoring the murky regulatory climate surrounding digital assets.

Elliptic Enterprises, a blockchain analytics firm headquartered in the United Kingdom, reported Tuesday that the $2.5 billion in penalties covered a broad range of infractions, including fraud, the selling of unregistered securities and a failure to uphold Anti-Money Laundering regulations.

The SEC accounted for the lion’s share of the penalties at $1.69 billion. The CFTC imposed penalties of $624 million and FinCEN slapped crypto businesses with $183 million in fines. The Office of Foreign Asset Control handed out the smallest fines among the regulators at $606,000.

Cryptocurrencies have been described by many as the wild west of finance. Tens of thousands of crypto-centric projects have launched in the wake of Bitcoin’s genesis block in early 2009. Many of these companies got their start in 2017 during the height of the initial coin offering boom.

Related: With US regulators handing out $2.5B in fines since 2014, crypto is not the ‘wild west’ of finance

ICOs allowed crypto startups to raise millions of dollars without having to meet the stringent regulations of more traditional security offerings. ICO funding reached the tens of billions in 2017 and 2018 combined, attracting unwanted attention from securities regulators. The SEC successfully charged the founders of several crypto companies, which effectively put an end to the mania — in the United States, at least.