Cryptocurrency exchange Changelly admits it can ‘steal’ users’ Monero (if it wanted to)

Government regulators haven’t made things easy for anonymous cryptocurrency projects. Monero fans are complaining about being profiled by cryptocurrency exchanges, after Changelly was found to wield the ability to effectively “steal” cryptocurrency from customers.

One user has taken to Reddit to vent their frustrations. After attempting to exchange some cryptocurrency for Monero via Changelly, they were automatically classified as high risk. The funds were immediately quarantined until the account has been cleared of anything untoward.

A Changelly spokesperson has since confirmed the exchange service can indeed withhold suspicious transactions (and hold their funds until users provide further information).

“ To all Monero community, our risk management system doesn’t mark all transactions out of the blue,” explained a spokesperson. “[…] Monero is the crypto that hides a sender and recipient thus making transactions untraceable. This [is] a reason why big amounts of other currency got to be checked [sic] before [it’s] converted to XMR.”

Changelly has been quick to clarify that it holds no prejudice towards XMR traders – this is strictly business, nothing personal.

“We have no mistrust of and prejudice towards users trading XMR,” the spokesperson implored. “The matter relates to a Know-Your-Customer procedure that we had to implement due to the increased number of money laundering cases via our service.”

While the spokesperson was adamant that all funds are immediately released once cleared of anything fishy. Affected users would even be white-listed to avoid future delays, but Changelly stopped short of clarifying just how accounts are singled out for additional checks. Hard Fork reached out to Changelly for a statement, and will update this piece should it reply. But, it did confirm what happens to funds when it fails the checks: it keeps all of it (for an undisclosed period of time).

“Once again, our risk management system may put on hold some suspicious transactions and the security department is working hard in order to process such operations in minimum time,” the spokesperson added. “When a customer refuses to provide the required data, we cannot simply return coins as we wouldn’t like to operate and transfer coins that might be potentially stolen or raised by fraud.”

The regulatory pressure is no joke. In June, it was reported that Japan’s Financial Services Agency was pressuring licensed cryptocurrency exchanges to drop support for privacy focused coins. As such, several platforms delisted several popular anonymous cryptocurrencies, including Monero, Dash and ZCash.

The Economist published a great guide to cryptocurrency money laundering . Typically, dirty cash can be “washed” by purchasing cryptocurrency with it, splitting it up and exchanging it for several cryptocurrencies. Do this enough times, with the right coins (like Monero), and it should be clean enough to be swapped back for ordinary money.

CipherTrace’s latest cryptocurrency anti-money laundering report noted that over $1.2 billion in dirty money had been washed by trading anonymous alt-coins like Monero.

Update 08:15 UTC, September 6: Changelly has since reached out to Hard Fork with a statement concerning its policy on freezing suspicious transactions, supplied by COO Ilya Bere.

Here is the unedited response in full:

German bank replaces SWIFT with Bitcoin for international loan transfers

Bitbond, a German online bank, is utilizing Bitcoin to allow international transfer of loans.

The service allows small scale businesses that sell their products online to borrow up to € 50,000.

If the statistics on the Bitbond website are to be believed, the bank has already lent more than $10 million to 2,500 businesses.

Bitbond was launched in 2013, and was licensed as a financial institute in Germany in 2016. The company has so far allowed lending and borrowing of loans in Bitcoin.

The company is now using Bitcoin to facilitate international transfer of fiat loans as well, Reuters reports .

The loaned amount will be transferred to the borrower using the Bitcoin’s blockchain, only to be converted back to their country’s currency as soon as the transaction is processed.

Using Bitcoin to transfer the loans will purportedly make the transfer of loan quicker and cheaper in comparison to the existing transfer means.

Currently, most of the world’s banking institutions rely on the SWIFT network to facilitate international transactions, but that comes with several shortcomings.

Users end up paying several fees for each transaction they make through the network. These include transaction fees levied by the correspondent and recipient banks, and currency exchange rates charged by the banks.

It is also worth noting that SWIFT doesn’t actually enable the transfer of money, but only allows secure communication about payment orders between the banks.

At the time of its launch, SWIFT had revolutionized international transactions with its Bank Identified Codes (BICs), now popularly called ‘SWIFT codes’, which made transactions a lot securer and faster.

With blockchain technology, there’s a promise to make this process further efficient.

In fact, the Ripple Transaction Protocol associated with the world’s third largest cryptocurrency Ripple, was developed as a blockchain-based alternative to SWIFT — however researchers have cast doubts on the long-term efficacy of its protocol.

Transactions with cryptocurrencies can be made in a manner of seconds without huge transaction fees involved. There’s only one intermediary that needs to be paid, which are the miners confirming the transaction.

Bitbond’s development of a marketplace that relies on Bitcoin to transfer loans in fiat is interesting, but even Bitcoin currently suffers from high transaction fees and longer time span for processing the transactions.

The successful implementation of Lightening Network can change this, or other cryptocurrencies can be explored as a means for facilitating the transactions.

University College London tells us how it developed its blockchain program

University College London has its own center dedicated to blockchain – it’s called the UCL Centre for Blockchain Technologies (CBT). UCL’s blockchain team will be joining us at our very own Hard Fork Decentralized this week in London. Free sign-ups for their event are now available.

Before their event on December 13, where they’ll discuss decentralized finance, we wanted to learn more about what they do. We sat down and asked them a few questions about the UCL CBT:

What were some of the factors that went into the decision to start the UCL Centre for Blockchain Technologies?

The UCL Centre for Blockchain Technologies was one of the first centers to be set up in 2015. It was created on the back of the realization that in order for the adoption of Distributed Ledger Technologies (DLT) to be fostered into our socio-economic systems, a large coordination effort would be required. This is true not only at the institution level amongst government, academia, and business, but also at the internal level within an organization. Since DLTs require expertise from multiple different subject areas, the Centre was started to create a nucleus for blockchain research at UCL by drawing on the expertise from eight different departments internally.

What is your vision for UCL CBT’s future?

Earlier this year we were selected to be a part of Ripple’s University Blockchain Research Initiative . This has given us the financial resources to expand the scope of the centre. We will be focusing on greater breadth and depth of blockchain research both in socio-economic areas as well as technical development. Furthermore, we are expanding our public engagement, education, and also industry and government engagement. Our goal is to ensure and contribute to the safe and smooth adoption of DLT in our world.

One of the interesting things about blockchain is that it is so interdisciplinary – it literally exists at the intersection of technology, economics, and governance. What’s UCL’s approach to making sure that its students are well-suited to dealing with problems in all of these areas?

We look at DLT from three different perspectives: Business, Technical, and Legal and Regulatory. When doing research and teaching, we explore all of these areas and also the combination of these three. We draw on knowledge from experts in each of these areas to first go deep into each, and then explore the combination of all of them from a more practical perspective, often with the help of industry practitioners. This ensures there is a balance of academic knowledge and practical knowledge from the industry.

What are some of the challenges that arise from having to operate within such diverse areas of expertise?

One of the things we have found in exploring the different parts of the ecosystem is that people can become siloed within their particular areas and fail to look at things from a holistic perspective. For instance, in a survey the UCL CBT conducted on challenges in the market, people looking at DLT from business perspectives felt business challenges were the biggest and most important. People looking at DLT from a legal and regulatory perspective felt legal and regulatory challenges were the biggest and most important. Thus there was a lack of appreciation and perspective on the other areas that are all important for widespread adoption of DLT. When we operate in the ecosystem, we look to balance views by always bringing a wider perspective as DLT is interdisciplinary and wide-ranging.

There’s quite a bit of blockchain misinformation circulating on the web – and it is often being reinforced by influential people in the space. What is UCL doing to counteract the spread of misinformation about blockchain and cryptocurrencies?

Our role is to act as a neutral body that produces research and consultation based on rigorous academic standards and methodologies. The only way we can combat misinformation is by adhering to these standards. Practically this means we don’t get involved in the day to day hype, fads, and issues with DLT. We remain at arm’s length, taking time to look deeply into DLT issues.

There’s also a concerning amount of nepotism and shady business in blockchain. Does UCL take any measures to ensure that academics/scholars in its organisation have no conflicts of interest with regards to the projects they research?

The UCL CBT aims to be a neutral think tank with respect to fostering the adoption of DLT into our socio-economic systems. This means we as an institution don’t get involved with ICOs, where typically the greatest conflicts of interest can arise.

At Hard Fork Decentralized , the UCL CBT will be diving into the topic of decentralized finance. With a fantastic lineup of speakers, it’s an event not to be missed.

If you’d like to join, make sure you sign up right now for a free ticket! We hope to see you in London on December 13 at UCL CBT’s event.