2 Months Ago

The Malaysia Securities Commission (SC) has said that platforms and exchanges need to register with them by 1 st March 2019.

SC is to start regulating Cryptocurrency trading as it encourages businesses to be part of Malaysia’s expanding digital economy. Datuk Syed Zaid Albar, head of the Malaysian Securities Commission, said:” The New framework is part of the SC’s efforts to advertise innovation whereas guaranteeing investor safety within the buying and selling of digital belongings”.

The FCA has approved B2C2 to offer trading in contracts for difference (CFDs) for institutional clients so in effect allowing a regulated company to offer exposure to unregulated Cryptos. 

By using CFDs it will be possible to get leveraged exposure to cryptos without the need to have to store or actually deal in physical Cryptos so removing the need for a third-party custodian. With offices in London and Tokyo B2C2 was set up in 2015 by and is very active in the OTC market.

The recent FCA consultation paper has created a broad consensus that the FCA is being pragmatic about Cryptos and it is encouraging that the FCA and the Treasury are engaged to bring clarity to the market.

This ought to encourage further development of the infrastructure and so enable institutions to further embrace Digital Assets and in time retail investors, provided there are adequate risk controls and standards in place.

Digital Assets

On Friday

Boerse Stuttgart the German Stock Exchange, has launched its Crypto trading App, according to an official tweet dated January 31st.

The App has been developed by FinTech Sowa Labs — a subsidiary of Boerse Stuttgart Digital Ventures in an effort to make trading cryptocurrencies for investors more accessible and easier. A feature of the App is the Cryptoradar. This tool uses artificial intelligence to analyze 250,000 tweets per day from the crypto community, filter them by relevance and present them in a user-friendly format. Users will be able to gain an overview of market sentiment on Twitter in real time and can keep up to date discussions around cryptocurrencies.

A new UK start-up, International Property Network (IPN), have completed what they believe to be the first blockchain based property transaction, involving banks, conveyancers, agents, legal teams, buyers and sellers using Blockchain technology.

U.S-based law firm Squire Patton Boggs, U.K-based law firms Ashurst and Clifford Chance, Barclays, Commerz Real, SBI Nihon SSI, BBVA, Swiss Re and Royal Bank of Scotland are among 40 companies on IPN’s platform as they all seek to reduce the costs of real estate transactions while significantly speeding them up.

IPN has also been working with HM Land Registry’s Digital Street project to explore how they are able to use Blockchain technology to improve how it interacts with different parties.

IPN claims that cost-savings could be as high as $160 Billion p.a. as the current system is very reliant on analogue, predominantly paper-based, systems. The ability for many independent parties to work together on a property transaction in the same online environment progressing it in real time is revolutionary and could reduce the time to complete property transactions from months to weeks.

IPN, which harnesses R3’s Corda Blockchain, say recent trials have illustrated that businesses can use the platform within a few days without the need for complex changes to their back-office systems. This is because rather than creating yet another information storage, it provides a secure means of transacting with users’ existing technology - with each party retaining control over their own data.

This not only removes some of the GDPR challenges and other compliance issues, but also allows the various players to retain control, and their independence, while removing the cost of continuous re-checking and reconciliation of facts and information by each party at its ‘border’ - which adds much delay, cost and friction.

The platform could prove to be significant internationally too. It has the potential to greatly assist many projects globally which are looking to tokenise real estate portfolios in an effort to have greater transparency and liquidity, whilst also making property investments available to smaller investors via fractionalisation.

Real Estate
MISE has reportedly invested over 40 Million Euros into Blockchain projects, as Italy looks at using its wine industry to bring greater transparency to products made in Italy.

It is hoped this will empower the fight against counterfeits and fraudulent products claiming to be made in Italy, made elsewhere.

Fraud is a real challenge for the wine industry: It is estimated that the Italian wine industry loses over Euro 2 Billion due to wine fraud. This has encouraged Ernst and Young  (EY), to use Blockchain technology to help vineyards via its EY Ops Chain, originally launched over two years ago.

It is not just Italian vintners who are turning to Blockchain. Bufala Campana, famous over the world for its mozzarella, is using Blockchain technology and QR codes that can be scanned, using a mobile phone, to trace the products’ provenance.

One of the first companies to use Blockchain to trace the origins of a product was Everledger, which brought greater transparency to the diamond industry.  It is now turning its attention to wine, using Near-Field Communication (NFC) technology, via tiny silicon chips within labels and corks. These can be scanned, and the bottle’s provenance traced, giving consumers confidence they are buying wine as stated on the label.

Food & Beverages

On Thursday

IMF MD Christian Lagarde recently chaired the meeting – “Money and Digital Payments’ where the CEO of Circle (part owned by Goldman Sachs) extolled the benefits of a sovereign currency using Blockchain technology, allowing globally trade not rely on central clearing institutions.

Meanwhile in MFU- Japan’s largest bank has confirmed that it is to issue its own Blockchain powered digital currency later this year. Is it believed that digital wallets will replace physical wallets in the future.

This announcement follows Mizho’s statement that it was launching a digital currency, J Coin, pegged to the Japanese Yen, which will use QR codes scanned from a mobile phone. So far, Mizho have signed up 60 banks onto their new “Banking Digital Currency Platform”.

The Japanese seem to be taking a more accommodating stance towards Digital Assets, with proposed legislation being discussed that would relax their tax treatment. Which may explain why we are seeing a number of initiatives in Japan being announced.

In the UK, we have seen the announcement that Coinbase are to launch a VISA debit card that will allow conversion of digital assets to fiat and withdrawal cash from ATMs/ cash machines. The intention is that the card will be rolled out to other European countries in the coming months. Although users will be disappointed to see that transactions charges of 2.49% are to be levied, while usually there are no transactions charges using other types of debit cards.  However, an interesting feature of the new Coinbase debit card is that they will notify users if their passwords are found on other websites, automatically blocking the Coinbase card as a way to protect card users.

Digital Currency
The Universal Euro stablecoin is being launched by the Universal Protocol Alliance (UPA), a group of  Blockchain organisations, and is reported to offer payment of interest to holders of this new stablecoin.

UPA is aiming to encourage 100 million people to use Digital Assets, while tackling one of the key potential challenges around Blockchain adoption – interoperability. In other words, ensuring different Blockchains are able to communicate with each other.

Tether, the largest stablecoin by value, which has a current market capitalisation of over $2.3 Billion, has announced that it is not entirely backed by US$, but also holds loans and other assets as collateral. The announcement arguably takes it a step closer to more traditional instrument.

Similarities between some digital currencies and traditional currencies appear to be growing as innovators take features from both types of currencies. Some will be disappointed that Tether is not actually backed 1:1 by US$.
So, is Tether that different from the banks it is trying to compete against?

Blockchain Influencers
Digital Currency
In 2014, Mastercoin launched the first Initial Coin Offering (ICO).

It took nearly three years for this capital-raising mechanism to really take off, which subsequently created over 5,000 tokens raising over $22 Billion on a global basis.

As regulators turned their attention to ICOs, arguing that many of them ought to be treated as securities attention has Increasingly focused on the development of Security Tokens (STOs).

STOs are often asset-backed and are subject to security regulations in the jurisdictions in which they are launched and marketed. Making global offerings onerous and practically impossible.

STOs are usually backed/pegged/linked to an asset, examples include private or publicly traded shares, bonds, property (residential and commercial), commodities (gold diamonds), foreign exchange ($, Yen, Euro, £) and even exotic investments like wine, violins, art and other collectables.

STOs, being Digital Assets, mean that they can be listed on Digital Exchanges, which in turn enables them to be traded 24//7 as well as enabling enables smaller investors to buy and sell these assets.

Historically some of these assets, such as real estate and collectables, have proved to be illiquid, and the preserve of the wealthy and institutional investors. However, STOs ought to be able to widen the number of investors who can gain exposure to these previously illiquid assets in the future.

More recently we have seen organisations that want to raise capital by issuing tokens using one of the 300 digital exchanges to launch Initial Exchange Offerings (IEOs). These IEOs are very similar to an ICO, but by being listed on an exchange hopefully have greater liquidity.

Potentially they offer investors a degree of comfort because a third-party (the exchange they are to be listed on), has carried out a degree of due diligence. If the token meets all the tests - including that the company that is creating the it is not intending to use any capital raised to build its infrastructure, IT, or platform etc. it may be classed as an exchange or utility token, so outside of the regulations that capture STOs.

Some exchanges have decided to call their IEOs Direct Premium Offerings (DPOs), usually designed to offer investors access to a cryptocurrency at a discount to the market price. In traditional stock exchanges these are called “rights issues”.

More recently we’re seeing Token Curated Registries (TCR), which are designed to replace centralised lists, eg. a list of the top ten hotels or restaurants in a City. TCR is like an incentivised voting game that creates lists which are maintained by the people who use them. Users collectively vote (using tokens) to decide which submissions are valid, which should be included in the list, and where they will be ranked.All of the above typically use Blockchain technology as part of the process of bringing a company to a wider audience, apart from Direct offers, which simply look at raising capital (much like an Initial Placing Offer (IPO)) but do so without the costly underwriting fees of investment banks.

As Slack have announced they are to launch a Direct Offer, will Pinterest, Zoom, Uber or AirBnb also use Direct...

Capital Markets
Game of Thrones is the most valuable TV show ever produced, and as the graph below shows, it has commanded massive audiences since it was launched in 2011.

But despite its name Ravencoin is fictitious, borrowed from the fantasy world of Game of Thrones, yet has no commercial link to the hit TV show.

RavenCoin was created in January 2018 and did not carry out an Initial Coin Offering but has organically. Today it is in the top 40 in terms of its capital value being, valued at $250Million according to CoinMarketCap.

Despite which Ravencoin has not had a bad track record, and initial miners of RavenCoin will be very pleased to have seen their coins increase in value by over ten-fold in just over a year.


On Tuesday

The International Chamber of Commerce (ICC) was set up after WWI, in 1923, to help make global trade more efficient. It has signed an agreement with a Singapore-based business Perlin to use its Blockchain expertise.

John Denton, the ICC’s current secretary general, before his appointment said. “We think this might be one which we can look back on in 100 years and say the ICC shifted blockchain in a way that enabled the private sector to function more effectively in a sustainable way and actually create more opportunities for people.”

Bold words about a technology with challenges of scalability and adoption? However, with multinational corporations like Coca Cola, McDonalds and Amazon as members of the, along with its 45 Million other companies in over 130 countries, the ICC has the global reach to raise Blockchain’s profile.

The ICC is thought to be looking to use Blockchain technology to help with cross-border transactions, traceability and transparency of goods, and to improve the efficiency of how supply chains function.

Supply Chain
In cities across the world, Blockchain technology is being used to help tackle the challenge of mountains of rubbish which we create in our throw-away culture.

For example, in Sharjah, in the United Arab Emirates, Blockchain technology is being used to create a platform designed to cut costs for customers applying for permits, from several days to only a few hours. This platform validates, processes and store transactions about Sharjah’s rubbish.

Plastic bank has been using Blockchain technology for a while to track, monitor and record various projects aimed to recycle plastic waste. As multinational-corporations, are increasingly coming under pressure from shareholders to prove that their Corporate Social Responsibility initiatives have real value, Blockchains can, and indeed are, helping. Plastic bank is working with the SC Johnson program in eight villages in Indonesia, where tokens are being given to people to encourage them to collect and recycle plastic. These tokens can then be redeemed for clothes, food, medicine and even books. So not only is SC Johnson funding an initiative to help clean the environment, but also making a real difference in remote communities.

Shell is offering bonuses to staff if they are able to suggest ways to reduce its carbon footprint. We will likely see more incentives and gamification in the form of tokens to nudge and encourage clients to change behaviour, and create less carbon emissions.

Meanwhile, in Bangalore Blockchain technology is being used  to record complaints, creating a more transparent record. So when residents report and complain about rubbish, there will be a database, that cannot be tampered with, available for all to see about when and where the rubbish is reported, and follow up actions.

Initiatives using Blockchain technology like those in Indonesia and Bangalore, are not going to change the world, but will have a very positive impact on the local communities and hopefully can be replicated elsewhere.

Environmental Services
In a speech at the inaugural Council for the International Civil Aviation Organization (ICAO) in Abu Dhabi, the UN aviation president claimed that air traffic is going to double up in the next 15 years.

He believes Blockchain technology can make the industry more efficient. Handling the huge amount of data and security measures required to transport passengers across the world is a real challenge for the airline industry. However, by using technologies such as facial recognition, interacting with government databases, and having access to information in a secure manner and real-time globally via a Blockchain, offers some solutions. It is not just dealing with passengers that it is thought Blockchain can help, but also to reduce the huge amount of paperwork and customs documentation required in the air cargo industry.

Then there is the necessity to ensure that aircraft spare parts are genuine, and as increasingly airlines and their spare parts suppliers start to use 3D printing to manufacture spare parts to avoid the need for lots of expensive parts to be held in multiple locations globally, there has been discussion about the need for “A Chain of Trust”. This refers to the use of Blockchain technology to protect the intellectual property (IP) when using 3D printing, by issuing a license.

Consider a situation where none of the parties (the airline, the printing service provider and the parts' manufacturer which owns the IP) do not trust each other. One needs to determine who owns the IP and whether the part has already been licensed by someone else.

It is helpful to think of Blockchain technology as a skeleton, infrastructure, from which other technology hangs, as it facilitates data to be stored and distributed in a highly secure manner enabling, where required, Artificial Intelligence, 3D printing, facial and biometric identification.


Last Friday

F1 is partnering with  Anomica Brands to develop an online game using Blockchain technology, called F1 Delta Time.

Anomica, which is known for its gamification, AI and Blockchain expertise. F1 intends to use tokens so that players, during the online game, can collect and use them towards upgrades. The first phase of the game, based on F1 race tracks, is aiming to be launched in May 2019.

Watched by over 1.5 Billion people in the 2018 race season, and with over 63% of its audience under 45; presumably, Delta Time is designed to attract and appeal to younger viewers especially in Asia, where economic growth is strong and global brands which typically sponsor F1, want to grow their presence.

The global gaming market is reported to be worth a staggering $137 Billion with over 2.3 Billion gamers. The F1 brand (one of the world’s best-known brands) is highly attractive to get the attention of gamers and a slice of this growing market.

F1 is no stranger to video games. Indeed, its drivers use them for training as a simulator, and last year Enzo Bonito, who had only used video games, actually beat an Ex F1 driver on a real race track in Mexico.

Is it too far a stretch to foresee that in time tokens, used in the new Delta Time online game, could be used either on F1 race tracks around the world or be traded on some form of digital exchange? What is certain is the gaming market will be monitoring this new F1 game, which incorporates Blockchain technology, as any unique marketing angle that appeals to this young expanding market and quickly copied.

Computer Games
It typically takes six months to buy a house according to Acre, a UK Fintech firm, that has just received a capital injection from one of Europe’s biggest insurance companies, Aviva.

Acre has announced a partnership with Sesame Bankhall Group, one of the UK’s leading firms of financial advisory networks, with over 11,000 advisors. Last year Sesame Bankhall Group placed £42 Billion worth of mortgages, so clearly has distribution capabilities.

Blockchain technology can create one record that the relevant parties can share in a highly secure environment, so the lender, borrower, lawyers and financial advisors have access to real-time information on the progress of mortgage applications.

Given that predominantly, lawyers and financial advisors remunerated by charging fees on a time basis, any technology that improves efficiency should be welcome.

Real Estate

Last Thursday

Fedwire is a real-time settlement system used by the US Federal Reserve and by US banks to settle financial transactions.

To maintain confidence in the financial markets, it is vital that Fedwire is always available, so it was not good news to see this comment posted on Reddit on 2nd April 2019–Today the United States Federal Reserve experienced an unexpected issue and went completely down. No incoming or outgoing wires went through in the entire country. It’s still unresolved and yet not one single news outlet seems to be reporting on this and the massive impact it has.”

Fedwire processed over $2.8 Trillion of transactions daily in January 2019, but as they’re a centralised system, it will always be more vulnerable compared to a Decentralised system. Bitcoin was created as a decentralised system and has only been unavailable for 0.02% of the time since it first started over ten years ago. Bitcoin now has more than 10,000 nodes, so it is doubtful they will all be non-operational at the same time, thus the attraction of a decentralised mode of operation.

Several previous Fed bank payments experts have been recommending for a while that the Fed updates its system, so maybe it will look at Blockchain technology to be part of its upgrade?

Financial Market
Established in 2006, and with over 500 Million accounts, VKontakte is the ninth most visited website in the world according to SimilarWeb.

Users of the Russian social media network, based on the amount of time they spend on the VKontakte’s platform, will receive tokens. Tokens earned this way could be transferred between users, to purchase goods and potentially be converted to cash via VK Pay. VK Pay is a money transfer service that lets VK users send money to each other in messages, using a credit or debit card. 

This format is similar to Facebook’s plans for Facecoin, which is reported to be launching later this year in India on WhatsApp, and follows Line, Japan’s largest social media platform, which is using Digital Assets.

VKontake’s co-founder Pavel Durov also founded Telegram, which raised over $1.8 Billion in 2018 and is reported to be worth over $2.7 Billion personally.

These massive social media firms in three different continents are all using a potent cocktail of gamification and loyalty programs to incentivise and reward their customers for spending more time on their platforms. They presumably will be collecting information on what the tokens are being used to purchase and sell this valuable consumer data to advertisers.

Social Media
Social Web

Last Wednesday

In the USA, the Securities Exchange Commission (SEC) has released guidance on the issuing of Digital Assets and the way these assets are treated.

The inference is that if certain Digital Assets comply with its direction, then no action will be taken by the SEC, but each company that has, or intends, to create a Digital Asset will be reviewed on a case by case basis.

The guidance, which is called ‘Framework for Investment Contract Analysis of Digital Assets’ attempts to clarify whether a Digital Asset will be treated by the SEC as a security, and therefore will be subject to federal securities laws. The guidelines explain how the Howey Test may be used in connection to Digital Assets, and in particular to Initial Coin Offerings (ICOs).

The SEC outlines some examples, which create the impression that many ICOs launched previously may have breached SEC regulations, as they did not register with the SEC.

Some ICOs may have sold tokens that could be classified, under existing federal legislation, as an investment contract.

However, Bitcoin is not in the SEC’s spotlight, as it has been created in a decentralised manner. Which may help explain why Bitcoin has performed so well this week.

Information Security
Digital Assets
Stated in a recent article, Hong Kong forbids Security Token Offerings (STOs).

However, if you read the article, it also goes on to say that if you have the correct regulatory licences, you can sell STOs. STOs are now widely accepted as being seen and treated by regulators as a security, in the same way as buying a share in a company, like Apple or BMW, is processed. It is not illegal to sell these shares to raise capital, but the company, i.e. Apple or BMW as well as its corporate broker, need to follow the correct regulations in each jurisdiction around the world.

The reason behind treating STOs as securities are because they typically are backed by real assets such as property, commodities, bonds or indeed shares in private or publicly quoted companies. Due to the need to be regulated, STOs costs to raise capital are higher than Initial Coin Offerings (ICOs). Different regulators globally have taken different stances to ICOs; several of them saying that regulation of ICOs is not the same as those used to regulate the buying and selling of cars and houses. While some countries have banned Digital Assets, others have passed legislation to encourage the issuance of these assets.

PWC’s 4th report on ICO/STO looked at global trends, the amount of money raised and how legislation is evolving. One of the trends which PWC highlighted is “Asset tokenisation, i.e., the conversion of real-world assets to the Blockchain, is a dominant trend in 2019”. As we see greater clarity from regulators, we are more likely to see increased use of Digital Assets by institutions. If this creates more liquidity and the ability to trade 24/7, many assets, restricted to standard trading hours today, could result in Digital Assets being a compelling alternative and potentially may reduce asset price volatility.

Token Offerings
Digital Assets