Marco StrengCEO Genesis Mining

Large Scale Mining Operations and

Cloudmining from a regulatory perspective

Introduction

State of Digital Money 2015

Cloudmining & Large Scale Mining

• Large scale deployment of miners in either single big facilities or more smaller distributed places

• Installation of hardware in optimized infrastructure

• Using customized software for controlling and hashpower optimization

• In case of cloudmining – distributing hashpower to each single user

Image source: Genesis Mining Europe II Facility 3

Introduction

State of Digital Money 2015

Cloudmining & Large Scale Mining

The regulatory perspective

State of Digital Money 2015

The current situation

• “Mining and mining pools per se will not be regulated“ – Superintendent Benjamin Lawsky, Keynote Speech Money 20/20, 2014

• Still waiting for the final version of the Bitlicence

It is preferable to wait instead of drawing wrong conclusions based on inaccurate assumptions

Ponzi Schemes – a growing threat in the cloudmining market

State of Digital Money 2015

• The cloudmining business structure can be exploited by malicious providers to run a ponzi scheme under the umbrella of mining

• No, or only a fraction of the coins are mined and the money of the clients is taken for payouts of the supposedly mining rewards to users instead

• It is difficult for uneducated users to see the difference until the ponzi scheme is collapsing at some point and is shutting down the operation stealing money from the clients

• Since the malicious providers mostly are anonymous it is nearly impossible to make them liable and soon a new ponzi scheme will be born doing the same again

Ponzi Schemes – a growing threat in the cloudmining market

State of Digital Money 2015

Preventive measures for customers

• Anonymity – Is the service provider anonymous?• Transparency – Does the service provider show pictures of the

mining facilities?• Is the product realistic?• Is the price realistic?

Ponzi Schemes – a growing threat in the cloudmining market

State of Digital Money 2015

Preventive measures for authorities and regulators

• Performing audits for hashpower similar to audits for exchanges proving to cover all funds

• Checking whether the hashpower is really owned by the provider contractually and enough electricity is secured

• Identifying service providers