8 March of $273m and $91m respec-tively, according to the Chicago BoardOptions Exchange (CBOE).

Futures volume is growing rapidly. Infact, in February Futures volume rep-resented 35% of global BTC spot vol-ume. For those not familiar withfutures, the CME futures market isnearly as big as Binance for Bitcoinwith Spot Volume, at $84m and $110mrespectively.

The institutional face of Crypto andBlockchain is gaining traction andstarting to form a shadow over the clas-sic characters, which are struggling tomaintain a foothold.

In order for Cryptoasset markets tomature, regulation typical of the tradi-tional markets is needed that protects

investors and traders.As Cryptoassets grow, more institu-

tions step into the ring, hostile playersin the space will be relegated to oper-ating in offshore havens with shrink-ing user-bases, vulnerable to theoscillations of manipulated markets.

The reports by Bitwise, venture com-panies and concerned communitiesare a welcome spotlight in 2019.

Arnie Hill aka Crypto Arnie (Twitter:@The_CryptoArnie) in conversation withJames Bowater

IMPORTANT INFORMATION: THE VIEWSAND OPINIONS PROVIDED BY CITY A.M.'SCRYPTO INSIDER AND IN THE CRYPTO A.M.SECTION SHOULD NOT BE TAKEN ASINVESTMENT OR FINANCIAL ADVICE.ALWAYS CONSULT WITH YOUR FINANCIAL ADVISOR.

Andrew Adcock is CEO of Crowd forAngels, a leading player in the UKcrowdfunding market, having

helped to raise several million pounds ofgrowth capital for dozens of companies.Crypto A.M.asked him whether tokenisedsecurities are the future of fundraising.

WHAT IS A TOKENISED SECURITY?A tokenised security is type ofCryptoasset that exists on a blockchainbut with the key characteristic that itmeets the FCA’s regulatory definition ofbeing a ‘Specified Investment’, like sharesor a bond. Tokenised securities areclassed as securities because they grantcertain rights to holders associated withtraditional securities, like ownership,voting rights or rights to a share of theprofits.

HOW TOPICAL IS THIS?Barely a day passes without an emailsliding into my inbox promoting anupcoming STO (Security Token Offering)

or a company looking to digitise its captable (shareholder register). This givesme an honest insight into the pulse ofhow the security token industry isdeveloping.

IS THERE A MARKET FOR STOS?While STOs might not yet be seeing theboom times that initial coin offerings(ICOs) did in late 2017, recent trendssuggest that security tokens mightbecome more popular than their

administration burden from the companyand gives it the underlying assurance thatthose holders are known. Supporting myview, cap table digitisation is already beingimplemented by companies and issupported by the UK government.

WHAT IS CROWD FOR ANGELS DOING?To date, the financial instruments issuedby our clients to investors have beentraditional shares and bonds. However, in2017 we began to take advantage ofopportunities in the blockchain field byoffering investors access to Cryptoassetsand the ability to invest with bitcoin. As anFCA-authorised company itself, Crowd ForAngels believes it looks well placed to takeadvantage of the growth opportunities inthe STO arena. One example of a companylooking to raise funds on Crowd For Angelsvia a tokenised security is whisky investorOak Group. Headed by a team withbackgrounds in the asset and fundmanagement industries, Oak is aninvestment vehicle focusing exclusively oninvesting in bottles and barrels of rarewhiskies. Oak Group will issue the OakToken, with the aim being to provideinvestors with transparency. Everytransaction, purchase or sale will bedocumented on their blockchain ledger,allowing for a portfolio to be examined onan ever granular view.

For more information seewww.crowdforangels.com

22 TUESDAY 2 APRIL 2019FEATURE CITYAM.COM 23TUESDAY 2 APRIL 2019 FEATURECITYAM.COM

more resources and efforts beingdrafted to satisfy SEC requirements.There is clear polarisation occurring inthe industry between ‘Crypto’ and‘Blockchain’. Institutions are lookingfor all angles to distinguish away fromthe reputation of the ‘Cryptos’.

The presentation to the SEC suggeststhat Bitcoin is uniquely resistant tomarket manipulation and fraud, along-held concern of the SEC. Previ-ously, the SEC has outlined two possibleapproaches to satisfy their require-ments: showing unique resistance tomarket manipulation and fraudulentactivity, or surveillance sharing (privateagreements to share market surveil-lance with regulated exchanges), in

The clocks have gone forward over theweekend, and time never stands still in theCrypto market.

Bitcoin (BTC) has had a bullish past month,settling at above the $4,100 level. Interestingly thealtcoins have had a good past month eroding BTC’smarket dominance (percentage value of overall Crypto market) to50.13% and, at time of writing, are trading at US$4,130.20;Ethereum (ETH) at US$142.31; Ripple (XRP) at US$0.3123; Binance(BNB) at US$18.20; and Cardano (ADA) at US$0.07. Overall marketcap has risen nearly nine per cent since the last Crypto A.M. atUS$145.29bn (data source: www.CryptoCompare.com)Last Friday (29 March) the US Securities & Exchange Commission

(SEC) announced a further delay on the two Exchange-TradedFund (ETF) applications it is considering from Bitwise AssetManagement/NYSE Arca, which was put back to 16 May, andVanEck/Solid X, which was put back to 21 May. Commentators stillfirmly believe that eventually an ETF proposal will satisfy thestandards required by the SEC. The Crypto community willcollectively no doubt hope that 2019 will see an approval.There have been a few several bullish pieces of news from Japan,

however. E-commerce giant Rakuten has announced that, havingreceived regulatory approval from Japan’s Financial ServicesAgency, it is to launch its own cryptocurrency exchange. The‘Rakuten Wallet’ is set to go live in June.

Cointelegraph Japanreported yesterday that the Coincheckcryptocurrency exchange will launch a BTC over-the-countertrading desk for large-scale institutional investors. They haveindicated that, in the future, they will consider adding support forother crypto currencies.Japan Railways Group is reportedly looking to add

cryptocurrency payment options for travellers. According tomainstream commercial news network ANN, the JR Group couldestablish cryptocurrency payment options through a partnershipwith a major bank, which could also see it launch a cryptocurrencycompany, believed to be an exchange.Separately, one business sector that I believe could benefit from

the application of blockchain technology is the auditing industry.How will the ‘Big Four’ respond?I met Auditchain founder Jason Meyers last week to learn how

they are transforming the audit and reporting profession.Auditchain proposes big changes to how enterprises plan andoperate in the digital age. “We’re entering the age of theprogrammatic enterprise, which requires continuous ‘Bitcoin-style’external validation with real-time financial disclosure,” he told me.If the proliferation of utility and security tokens hasn’t movedregulators to modernise, could Auditchain’s disclosure framework for digital asset issuers cause regulatory disruption?Watch this space.

order for the SEC to approve a BitcoinETF. This, the crux of the situation onthe Bitcoin ETF, giving rise to never-end-ing delays and rejections. Three argu-ments put forward around fungibility,transportability and exchange tradabil-ity form the basis of the Bitwise argument.

BITCOIN FUTURES: A REAL CONTENDER Institutionalisation of the market ishappening through the back door.Here’s why - actual volume of BitcoinFutures on regulated exchanges isgrowing to be a significant contender,with an actual spot volume and fu-tures volume of the market between 4-

In an incredible behind-the-scenes 227-page presentation given to the US Se-curities & Exchange Commission(SEC) by Bitwise Asset Management etalia last month, a damning indict-

ment of the Crypto-space was madewith substantial analysis and evidenceof spoofed volume, ‘wash trading’ andirregular activity.

In an effort to improve the reputationof Bitcoin and future Cryptoassets, Bit-wise’s report outlines several examplesof fraudulent and ‘suspect behaviour’ onthe majority of crypto exchanges, in-cluding naming large exchanges such asCoinbene, Lbank, BitForex and OkEx. Ina conclusion made by Bitwise ‘just ten ofthe 81 top exchanges are revealed tohave actual volume’: cited to be Coin-base, Kraken, Bittrex and others.

The list of abusive practices is numer-ous, from trade printing, wash trading,monotonic trading volume, irregularspreads and spoofing adjusted daily vol-umes. These all point towards a rottencore within the industry of misleadinginvestors and companies into a falsesense of security around the exchangesthey interact with.

In the race to appear as the most activeand liquid exchanges around, wash trad-ing is rampant. Coinbene, one of the‘suspect exchanges’ of the report, failsthree vectors of analysis - trade size his-tograms, volume spike alignment andspread pattern analysis - in comparisonto patterns of 10 ‘real exchanges’ thatseem to have similar trends.

WASH TRADING EXPLAINED Wash trading, typically deployed by ex-changes, market makers or companies,is the use of liquidity in forms such asnative tokens, Ethereum and Bitcoin.Programmes are then used to recyclebuy and sell orders on exchange, creat-ing a higher reported daily volume andused by many traders and investors.

Wash trading helps give the appear-ance of an activity traded Cryptoasset,and implies liquidity within that asset.Very difficult to spot, wash trading is thebuying and selling of tokens with ordersseconds apart and within very smallvariations. Worst of all, it’s free to recyclethese tokens, as markets both internaland external to exchanges often have

zero per cent trading fees.With malpractices currently deployed,

many will be looking at their favouritetools such as CoinMarketCap (CMC) togauge how their investments are doing,unknown to many that much of the vol-ume is fake and there may not lie anyreal liquidity behind some tokens.

Polarising rapidly, it is estimated thatthe real market volume, when adjustingfor fake reported volume and wash trad-ing, is an astonishing 95% smaller thanreported. Reported volume in March ina four-day period was $6bn – which wasestimated to have an actual volume of$273m.

It’s a widespread practice in the indus-try and currently the main mechanism

against fighting a market correction. An-other side of wash trading is the flour-ishing avenue of exchange tokens -giving investors reduced fees or access toexclusive investments. Asset manage-ment of exchange tokens is often. In thereal world, this is market abuse and ille-gal, so why not in Crypto?

Recent conclusions have also been pub-lished by other bodies. A BlockchainTransparency Institute report found thattwo of the top five reported liquiditypairs have less than one per cent of theirreported volume.

LET’S TALK ABOUT SECThe push to approve a Bitcoin exchange-traded fund (ETF) is underway with

Designed by Phill Snelling,Bowater Media

In association with

CITY A.M.’SCRYPTO INSIDER

Crypto A.M. shines its Spotlight onCrowd for Angels

@CityAm_CryptoE:CryptoInsider@cityam.com

JAMES BOWATER

PARTNER CONTENT

Our series on AI, Blockchain, Cryptoassets and Tokenisation

What if ‘the slowest database ever in-vented’ could speed up the realworld by a factor of 10, when oth-

ers can’t? Speed up the conveyancingprocess of a property from up to 90 days tojust over a week?

This would be pretty impressive. Espe-cially since we’ve had database technologyfor decades and been unable to achieveanything of the sort - for good reasons weknow and understand, to do with the nec-essarily independent governance of all ofthe parties involved: buyers, seller, survey-ors, lenders, insurers, etc, and not least, inaddition to this, their legal representatives.Not forgetting HM Land Registry of course.

‘Let's put them all together on one data-base,’ I hear you say. But here’s the rub: whowill own it? Who will run it? How can it bepoliced? How will the independent gover-nance of all these different parties be main-tained? That in a nutshell, is why HM LandRegistry has been unable to do this in thepast 30 years.

In Estonia, as in the UK, this process cantake 90 days –or it used to. In Estonia it nowaverages eight days – with commensuratecost savings, no doubt, since the manyhuman steps necessary for realignmentand cross-checks, most of the friction, is nolonger necessary and so has been removed.

Which is why HM Land Registry, togetherwith Blockchain Digital and 39 otherglobal partners, have this month begun atrial using ‘the world’s slowest database’ tospeed things up.

The point being that this technology is nomere database and is more than a ‘distrib-uted ledger’ – evident in that fact thatblockchain can do a number of things thatordinary database technology could notand still cannot. Mostly deriving from itsability to connect together or communi-cate between any miscellany of datasources or databases. While they each keeptheir ‘sovereignty’ (governance) intact. Theydo not need to be in the same database, or

indeed insider the same perimeter.The implications of this are enormous in

enabling us to do many things that wereinconceivable before.

Shared workspaces to progress transac-tions, such as the ‘instant property net-work’ that HM Land Registry is testing, areextraordinarily powerful – with many,many applications.

Add to this to the many new ways ofdoing things that are enabled by the abilityto fractionalise assets and make micropay-ments, including micro-insurance, re-wards and incentives, fluid ownership, andthe picture explodes. All things that are im-practical with ordinary databases, no mat-ter how fast.

Plus, of course, real-time audit and fine-grain traceability – also in real-time – andwhat else might you need to complete thepicture of a revolution? Self-sovereign digi-tal credentials perhaps - throw that in, too.

To compare this technology to a databaseis to compare a racehorse with a work-horse, or a F1 car with a combine harvester.Fine if all you need is to ‘go fast’ in a closedenvironment. But if you need to get outthere in the real world and get real workdone, neither are going to last very longunder real-world working conditions ‘inthe field’.

So as we consign this ‘database’ canard tohistory – it always was a case of painfulshoehorning – it’s great to see theBlockchain APPG providing some greatgrist to the mill in the form of a set of 10video case-studies or real, existing andbuilt, blockchain, real-world, applications.They’re summarised in ‘Frontier Insights’live at bbfta.org/insights.

After 40 successive weeks this will be mylast column for a little while –see you herein a month or so. Meanwhile, do join us atbbfra.org.

By Barry E James, chair of bbfta.org andfounder, Token Intelligence.

It is estimated thatthe real marketvolume is 95%smaller than

reported

Bitcoinwas the originalcryptocurrency and it wasdesigned to provide two primary

functions.First, it was designed to reward those

people who chose to invest time,energy and resources into running thebitcoin network. Second, to act as apeer-to-peer currency free from theinfluence of banks and governments.Bitcoin is a digital currency and, by

itself, they have no value. The coins arenot backed by any asset or by anygovernment. The only reason they havevalue is that there is demand for thecoins to serve the purposes of eitherstore of value, a medium of exchange orboth. Coins can act like digital bars ofgold or they can act as currency for

everyday transactions. Supply anddemand drive the price of thesecurrencies.Some companies create coins to

represent equity or other value in theirunderlying business as a means ofraising capital. The scope, purpose anddefinition of these tokens varydepending on the offering and must befully disclosed as part of new regulatoryframeworks and guidelines.Other tokens are not connected to the

operation of a public blockchain but arerequired to operate a service built ontop of a blockchain. The value of thesetokens is connected to the demand forthe underlying service. The more likelythe service is to grow and thus createsdemand for the tokens, the more likely

the value of the token will increase.What links all of these

cryptocurrencies is their underlyingtechnology - blockchain. Allcryptocurrencies have an underlyingblockchain providing services forrecording each and every transfer ofvalue in a public, transparent, andimmutable ledger.Before you invest in cryptocurrency

ensure that you understand if you areinvesting in store of value, a medium ofexchange, an equity related to acompany, or only the right to use aservice built on a blockchain.

Get in touch with us:info@blockchainrookies.com / Twitter @igetblockchain

Troy Norcross, Co-Founder, Blockchain Rookies

CRYPTOCURRENCY –BEFORE YOU INVEST…

Inwhat was a generally-positive week forCrypto, discovery of a new generation ofTrojan malware that targets Crypto assets

has caused concern.The ‘Gustuff’ malware targets Android

devices and aims to disrupt applications ofmajor exchanges and banks, according toMoscow-based cybersecurity firm Group-IB.Dubbed the ‘Weapon of Mass Infection’,

Gustuff is fully automated. Hackers use textmessages containing malicious links andfakes websites that mirror legitimate apps inorder to obtain data from users. Group-IBreported that the malware has targeted morethan 30 Crypto exchanges so far, includingCoinbase, BitPay and Bitcoin Wallet.The start of last week saw a drop in crypto

market cap to $137bn but the markets hadrebounded to the $143bn mark by theweekend.Bitcoin’s daily trading volume stood at

around $6.7bn early last week beforereaching $9.25bn at the weekend. BTC istrading at $4,177 and retains a market capof $73.6bn.Ethereum started off last weektoggling between $133 and $137. Midweeksaw the price climb to $139 and it movedwithin a $1 range until Friday, when theprice increased by 5% to $146 on Saturday.By midweek Ethereum’s daily tradingvolume was at $4.3bn and Saturday saw arepeat of this figure.

As Crypto gains popularity and more use-cases for blockchain come online, it isunsurprising to see big retail brands jumpinto the fray.Luxury-goods group LVMH is launching a

blockchain-based system to help preventthe proliferation of counterfeit goods byauthenticating luxury products. LVMH hasbeen collaborating with Ethereumdevelopment studio Consensys andMicrosoft Azure, and the new system willinitially be used to track the supply-chain ofthe Louis Vuitton and Christian Diorperfume brands.Coinbase has added Stellar Lumens

(XLM, 0.47%) to its Earn programme, which is aimed at rewarding users whocomplete educational courses on variouscoins. Users may earn up to $10-worth of XLM for successfully completing lessons, and a further $10 XLM for each user they refer.Exchange tokens are grabbing the

headlines this year – their popularity hasbeen driven by the initial exchange offeringmodel (IEO). There has been significantinterest in cryptocurrency exchanges thatalready host IEOs or intend to list soon. Thepopularity of these tokens was likelyencouraged by Binance’s BNB, resulting inother exchange tokens moving in tandem. Itwill be an interesting space to watch.

WIREX MARKET VIEW

From three months to a week

Android malware targets Crypto

unregulated cousins in the not toodistant future. According to figures fromthe March 2019 ICO/STO report fromStrategy&, in 2018 there were 28 STOswhich raised a total of $442m. This wasup markedly from just two STOs in 2017that raised a combined $22m. Incontrast, the report noted a markedslowdown in ICOs in the second half ofthe year.

WHAT ARE THE BENEFITS FOR COMPANIES?Our vision is that STOs will continue to seegrowth this year and next as companiessee the benefits of having digitisedsecurities. To give one example, if acompany’s cap table is digitised it tracks ablockchain token representing thecompany’s equity, showing a fluid numberof token holders. The removes the

The Oak Token aimsto provide whisky

investors withtransparency

WASH TRADINGAND FAKE VOLUMEEXPOSED

Andrew Adcock, CEO,Crowd for Angels