On Tuesday

Blockstack has been given the green light from the Securities Exchange Commission (SEC), in America, to proceed with its Initial Coin Offerings (ICOs) under the Reg A+ regulations.

Reg A+ is as an alternative to an Initial Public Offering (IPOs), allowing businesses that have a shorter trading history a way to raise capital, with fewer disclosure requirements than a typical IPO. Many of these mini-IPOs have not performed well and some have been dogged by concerns over fraud, prompting both Nasdaq and the New York Stock Exchange (NSE) to raise their listing requirements for Reg A+ companies.

However, Blockstack is being heralded as the first approval from the SEC since it started it’s “crackdown” on Cryptocurrencies, in particular, ICOs, as many of the ICOs were perceived as being securities by the regulator. This is significant as it sets a precedent for other firms that wish to raise capital in the USA using Reg A+ regulations i.e. obtaining investments from non accredited investors – the general public. Blockstack has used the SEC approval, and in doing so, has raised $28 million via the sale of its digital token. Approval from the SEC did not come without a significant cost for Blockstack, as it spent $2 million to get approval for its ICO.

Blockstack’s achievement to gain permission from the SEC could prove to be an inflexion point for Cryptocurrencies, but investors will still need to be vigilant. However, are we now going to see other firms using this route to raise capital and get listed on Nasdaq or the NSE, as opposed to the various new Digital Asset exchanges currently being established?


Digital Assets
If Libra is widely used for payments, cross-border payments in particular, would it be able to function like money?

With the announcement of Libra, Facebook’s new Digital Currency, it was reported in The South China Morning Post that Wang Xin - a director of the People’s Bank of China (PBOC) – said recently at an academic conference hosted by Peking University’s Institute of Digital Finance “If [Libra] is widely used for payments, cross-border payments in particular, would it be able to function like money and accordingly have a large influence on monetary policy, financial stability and the international monetary system?” China was one of the first countries to look at Digital Currencies back in 2015. Indeed China has enjoyed huge success replacing cash as its economy goes digital. Wepay (owned by Tencent) recorded 460 billion annual transactions in 2018, while Alipay (owned by Alibaba) recorded 197.5 billion transactions.

The widespread use of Alipay has created Yu’e Bao (Chinese for secret treasure), the world’s largest money market fund at $150 billion in size! Merchants use Alibaba’s fully digital C2C and B2C platforms which connect consumers and businesses while providing logistics, payments, and credit facilities. This means that merchants often decide to leave, in effect, their cash flow in Alipay’s Yu’e Bao’s fund.

Possibly, given the fact that daily life for many Chinese people is conduction without using cash, the PBOC does not wish to lose control and see a foreign Digital Currency, especially one backed by non-Chinese fiat currencies such as Facebook, gain too much traction in the Chinese economy. The PBOC, after receiving approval from the State Council, has been working with market institutions on creating a central bank digital currency, according to Wang Xin. However, there have been no public announcements of progress.

Cai Weide, a Chinese professor of Blockchain and crypto, who has worked around the world said “China was “lagging behind and that they should not underestimate the importance of Libra, an invention that, is (one of the) major financial technology reforms in the past 500 years”. 

There is no guarantee that Libra’s Facebook will succeed, but the ‘genie is out of the bottle’ causing many organisations and governments to take Digital Assets more seriously, as they begin to understand the challenges and opportunities these Digital Assets offer!


Digital Assets
Yes, which is the fourth biggest bank in India, has just helped raise fresh capital for a natural resource company, called Vedanta Ltd, and it is the first time in Asia that Blockchain technology has been used to issue corporate paper (CP).

Arun Kumar, Group CFO, Vedanta Group, said, “Vedanta will benefit from the digitized and simplified workflow which shortens the laborious process running into hours to just a few minutes and complete transparency that this platform offers to all stakeholders.”

Usually not backed by any form of collateral, CP is an unsecured money market-instrument issued in the form of a promissory note. The issuance of CP in India is substantially down, partially due to a lack of confidence and transparency in the banking sector. India’s banks were exposed in the last few years to the issuing thousands of fraudulent “Letter of Understandings” (LoUs), which triggered a liquidity panic across the market. People started looking for transparent and secure platforms for the issuance of LoUs and CPs. It is thought that Blockchain technology could help provide a solution. Blockchain can assist in the issuance of CPs, helping to reduce the turnaround time for issuance and redemption, while also increasing transparency for all participants, so boosting confidence.

The business of providing energy is rapidly evolving as the sector has to adjust to legislation to reduce carbon by decentralising, and we are seeing a rise of micro-generation suppliers entering the market.

Increasingly, we are seeing new business models being developed to hold, manage, and process data by implementing technologies such as Machine Learning, Blockchain, and Artificial Intelligence. With ever more data and the roll-out of smart meters, the “Internet of Energy” is slowly becoming a reality, increasing the need for data management even further.
In 2017, Cryptocurrencies fuelled interest in Blockchain technology, with many start-ups and pilot projects being funded by Initial Coin Offerings (ICOs), which seemed to be being launched on an almost daily basis! In the energy sector alone, there were over 150 projects using Blockchain, according to SolarPlaza, which it highlighted in a ‘Comprehensive Guide of Companies involved in Blockchain & Energy’. 
If you look at Google Trends to see the interest in terms of searches since December 2017, “Blockchain Energy” has fallen from 100 to 26,  so clearly, the hype has gone. However, we are still seeing a number of projects in the energy sector being developed in different parts of the world.
In France, Grenoble Ecole de Management conducted a survey to ask 112 experts from industry, science, and public administration in France about the role of Blockchain technology in the French energy sector. It wanted to understand how these experts thought Blockchain would be used in the next five years. Peer-to-peer energy trading and electric vehicle charging and sharing were the most popular choices.
Digisol, based in France, is a project designed with an objective to enable the sharing of solar energy between two apartments within the same building.
Meanwhile, in Japan, an Australian company has been using Blockchain technology to enable solar initiatives and working to expand the renewable energy market in Japan. Perth-based Power Ledger has announced a partnership with Japan’s Sharing Energy Company. Power Ledger is providing a Blockchain-based tokenised energy trading platform while Sharing Energy is a provider of solar installations and equipment.
According to Solar Market Insight, the USA installed 2.7 gigawatts (GW) of solar PV capacity in the first quarter of 2019. This brings the total amount of solar power installed capacity to 67 GW, which is enough to power 12.7 million homes. Furthermore, it is estimated that PV installations will double in the next five years, which will assist in reducing the impact of power generation on climate change. However, it presents some real challenges for power management and the electricity grid in the USA. In California, for example, solar farms have previously had to shut down on sunny days because the grid in the state was unable to handle the amount of solar energy being generated.
In 2012, Germany experienced industrial companies sustaining damages due to the instability of its electricity grid due to unprecedented solar and wind fluctuations. In Australia, there were major state-wide blackouts in 2016 for the same reasons.
This week a company called LO3 successfully gained funding from Royal Dutch Shell and Japanese giant Sumitomo Corporation Group. LO3 is looking at using Blockchain technology to track energy supplies, allowing users to select which supplier they wish to select so making peer-to-peer...

Emerging Tech
The announcement that this week SK Group (South Korea’s largest telecoms company) is going to invest $10 million into ConsenSys will come as no surprise, as South Korea has for a while been rapidly digitising its economy.

ConsenSys is a Blockchain consulting business set up by Joseph Lubin, co-founder of Ethereum. Although this is not the first time these two companies have signed an agreement, in 2018 they agreed to collaborate on technical training to help developers who wished to use the Ethereum blockchain.

SK group has been active in the Blockchain sector, having agreed to support Ok CashBag which is a Korean mileage loyalty program that has enrolled approximately 38 million people - 50% of South Korea’s population! The intention is to use Cryptocurrencies as part of the incentivisation program that Ok CashBag operates.

LG, the second-largest manufacturer after Samsung, has been developing a Blockchain-powered platform to help improve the transparency of information about food that is supplied to school canteens across South Korea. The intention is to have details about the production, processing, distribution, purchase, and consumption of products that school canteens use. As all of this information will be recorded on a Blockchain, it will become available for authorities, schools, and parents to see what is being consumed and who the suppliers are.

Samsung, which has dominance over the insurance, real estate, electronics, and payment sector in Korea, has been allocating most of the resources of its crypto and Blockchain department by developing its Cryptocurrency ASIC mining hardware. This hardware is used by people wishing to mine Cryptocurrencies like Bitcoin.

Hyundai, which is Korea’s leading car manufacturer, has been building a Blockchain-powered platform to monitor information about second-hand cars, such as mileage, age and service history.

The above examples are just a snapshot of the different ways that Korean conglomerates are using Blockchain technology, and how this technology is impacting on the day to day lives of Koreans. The Korean population is ageing quickly, as families tend to be smaller, meaning that there will be fewer workers to support its elderly retired citizens. This is one of the reasons why Korea is embracing new technology to ensure that it is able to create high-value exports and to be able to use technology as opposed to heavy manufacturing, which is arguably where much of its economic success historically came from.

In recent years retailers have been focusing on loyalty reward schemes as a way to entice their customers and encourage them to buy more.

According to a study by the Harvard Business School, increasing your customer retention by just 5% can have outsized benefits on profits of up to 95%! However, low redemption rates are a big problem for providers of loyalty schemes, as it can result in a lack of engagement. Loyalty schemes are often not that popular with companies’ accounts’ departments as they can create a large, intangible liability on a company’s balance sheet. Loyalty scheme members that do not redeem their rewards are not actively engaged but, on the flip side, members who do redeem points typically spend more and have greater satisfaction with loyalty programs.

According to Mckinsey, US companies spend $50 billion a year on loyalty schemes alone, and if you get it right, loyalty programs can generate as much as 20% of a company’s profits! However, with increasing online shopping, and particularly shopping on mobile devices, consumer retail behaviour has been changing dramatically and reward schemes seem to have lost some of their appeal. Customers often cite the difficulty of being able to redeem rewards and the fact that they may have many different loyalty schemes with few of them operating together. This is where Blockchain technology is able to help bring multiple brands together, offering a wide range of products to consumers in order to redeem their reward points.

Blockchain technology allows a customer to store all points in a single wallet rather than trying to manage these multiple schemes. It would be possible to create a solution enabling all schemes to have compatible rules for acquiring and redeeming points from different loyalty schemes. It is thought that Facebook’s proposed Digital currency, Libra, could be a real boost for loyalty schemes, as it may allow some form of global standard to develop for smaller schemes to then adopt. One challenge Facebook has is that regulators do not like the collection of data from individuals without the user being compensated. However, if Facebook started to pay it’s 2.3 billion users in Libra for clicking on content, it could be a way to satisfy regulators and, in turn, create the world’s BIGGEST loyalty scheme overnight! 

Loyalty schemes using Blockchain technology and Smart Contracts can automate many of the transactions, making the running of loyalty schemes autonomous. Data can be stored in a highly secure manner using a Blockchain platform, enabling the privacy of users’ information, which will increase the trust of the brand among these users. Implementing joint loyalty schemes with other brands becomes easier because Smart Contracts can handle the transferring and converting of reward points while validating users and redeeming these points. Furthermore, the brands/ retailers are not giving up control or access to their most important asset – their customers’ data!


Loyalty Programs
Deutsche Bank finally revealed what the market had been expecting for years, that it needed to reduce its cost base and become leaner and fitter against a backdrop of anaemic global growth.

This has led to Deutsche Bank cutting 18,000 jobs.
In April 2019, Christine Lagarde, Managing Director of the International Monetary Fund, told CNBC that cryptocurrencies and financial technology developments are “clearly shaking” the banking system. She also added, “We do not want innovation that would shake the system so much that we would lose the stability that is needed.”
However, like the story of the emperor who wore no clothes, the real problem is DEBT at a personal, corporate, and national level - and it is a global problem. Furthermore, with historically low-interest rates, the options available to central banks to stimulate economic growth in the event of an external crisis are extremely limited.
To give you a feel for the truly horrific state of affairs of how utterly out of control the debt in most major countries is, look at the US Debt Clock which illustrates in “real-time” how debt mountains are piling up in a selection of the very biggest countries in the world.
While the national debt numbers are a cause for concern, what is truly alarming is the foreign debt - otherwise referred to as the external debt as a percentage of Gross Domestic Product (GDP). This is the ratio between the debt a country owes to non-resident creditors and its GDP. External debt is the part of a country’s total debt which was borrowed from foreign lenders and is, therefore, vulnerable to the confidence foreign investors have in the ability of another country to keep paying its own debts.
The amount of debt owed to foreigners as a % of GDP for different countries has to be of concern - France 201%, Germany 145%, Italy 136%, Japan 105%, USA 87% and Holland with a massive 457 %. Asking for your money back, or not lending an indebted nation any further capital, potentially is one of the levers that foreign investors have in the event of the escalation of trade wars, disputes, and disagreements.
As we have seen, geo-political uncertainties can also trigger an enormous financial crisis e.g. the financial crash in 2008, and was also demonstrated by the spike in the price of oil in the 1970’s and the Wall Street crash in 1929 (which led to the global depression in the 1930s and was arguably the precursor to World War II).
Deutsche Bank estimates that the impact of the U.S - China trade wars has already resulted in over USD 5 trillion from the financial market, and the two largest economies in the world have yet to agree on terms. Given the uncertainty in Europe over Brexit, Greece has just voted-in a government that is going to reverse the spending cuts and tax hikes that it agreed to, as part of its financial bailout. If this leads to Greece getting back into financial trouble, will the Germans agree to bail it out again? Meanwhile, Italy looks to be headed for a confrontation with the European Union as its national debt spirals out of control to over $2.3 trillion (which is the...

Global Debt

Last Tuesday

In a recent report from Blockstate, in Switzerland, it revealed that so far in 2019 there are over 120 planned or launched Security Tokens Offerings (STOs).

These STOs have already raised over $1 billion, compared to 2017, when there were only 5 STOs which raised $67.5 million. STOs are set to replace Initial Coin Offerings (ICOs) as a method to raise capital and, because they are subject to much greater regulation and typically backed by real assets such as bonds, equity, commodities, property, etc., they ought to perform in a much less volatile manner. Given the higher regulatory bar that a STO has to comply with, STOs are likely to be much more attractive to institutional investors and will be traded on regulated exchanges across the world. The Blockstate report highlights that five countries are dominating STOs - Estonia, Germany, Switzerland, UK, and USA - who between them, account for 75% of the STOs issued to date.

The infrastructure to offer more STOs also continues to develop, as seen by the announcement of the tie-up between Globacap and Archax this week, both of which are regulated by the FCA in the UK. Globacap is a platform that has been built to be able to issue Digital Assets/STOs and is similar to Tokeny (which has just had €5 million invested into it, as detailed above by Euronext) and also has a partnership with Archax to use its exchange.  In 2018, Globacap tokenised its own shares. Then, in 2019, the platform tokenised two UK-based companies, helping them to raise capital, with Globacap serving as the custodian. The purpose of the platform is to provide built-in compliance to properly transfer ownership from traditional assets to Digital Assets.

Archax is looking to officially launch its exchange, which is intended to trade Digital Assets later this year. It will be using Blockchain technology to reduce costs and offer more transparency, both of which Archax believes are of great interest to the institutional investors that it is targeting.

The first STO in Germany, which was authorised by BaFin, took place in March 2019, raising €3.5 million for a company called Bitbond, a business that offers loans to small companies. Therefore, there is plenty of evidence that not only are STOs gathering greater traction but as we see more infrastructure in place it will enable asset managers and banks to be further engaged with Digital Assets. We have already seen the likes of Goldman Sachs and Fidelity offering custody solutions and Avia providing STO insurance, so all that we really need is evidence of good liquidity for STOs. If we see attractive trading volumes in STOs, Digital Assets really will be able to give their analogue paper-based alternatives a real run for their money!


Security Token
Almost daily there is a report of traditional investors embracing Digital Assets.

The CEO of Goldman Sachs, when asked if his firm is looking to launch a Digital Currency like JP Morgan, replied “Assume that all major financial institutions around the world are looking at the potential of tokenisation, stablecoins, and frictionless payments” 

Meanwhile, Wall Street seasoned-investor Henry Kravis (co-founder of KKR), has been investing in Parifi Capital which has $190 billion under management, and claims he now spends most of his time researching Blockchain and Cryptocurrency opportunities. Billionaire Peter Theil (co-founder of PayPal) has, according to Blomberg, also been investing in Blockchain and Digital Assets.

The chart shows the volume being traded in Bitcoin, and as you can see, even though the price of Bitcoin is still over 40% below the 19,454 it reached in 17th December 2017, the volume of Bitcoins being traded has been strong over the last few months.

Fidelity, with over $2.5 trillion under management, carried out a survey of 441 of its institutional clients and found that 22% had already bought a Cryptocurrency, and 47% thought that this asset class had a place in the funds it manages.

One of the concerns that have held back institutions has been that many of those that use Cryptocurrencies, like Bitcoin, are carrying out illegal activities. Therefore, in the recent analysis from Chainalysis, Bitcoin transactions have fallen in 2012 from 7% to less than 1% in 2018.

BitMex, which is the world's’ largest Crypto platform, last week reported over $16 Billion of trades in a day, demonstrating the clear demand and interest in this new asset class. Meanwhile, the Chicago Mercantile Exchange (CME) announced Bitcoin futures hit $1.7 billion in notional value traded on June 26th, 2019. This represents a 30% increase from its previous high, reportedly as a result of institutional interest.

Possibly one of the most powerful endorsements recently came from Mark Carney, Governor at the Bank of England who said, “Distributed ledger tech (DLT) projects have the potential to ‘unlock’ billions of pounds in capital and liquidity— and that they might one day see closer cooperation with the central bank itself.”

Digital Assets
Blackrock, the biggest asset manager in the world, with over $6.28 trillion under management, is capitalised at $72.billion and, during the quarter ending 31st March 2019, generated $3.246 billion of revenue.

Facebook is valued at $550 billion and, as at March 2019, it had over 2.38 billion users and generated $15.08 billion of revenue. Blackrock only has $6.49 billion of net cash and short term investments, compared to Facebook’s $41.12 billion of cash and short terms investments. 

Despite Blackrock’s size and global reach - having offices in over 100 countries- it is still very dependent on the Americas, as they make up 62% of the firm’s funds under management. Compare this to Facebook, where it is estimated that more than half of the US population (169.5 million people) use Facebook out of its 2.3 billion user-base. It is obvious that Facebook not only has greater distribution i.e. more direct clients that Blackrock, but Facebook has far greater penetration in faster-growing markets outside of the USA. 

Why is all this important? Well, quite simply, if you have the ability – cash and the type of global distribution and brand that Facebook has  - then even the biggest asset manager in the world needs to pay attention since Facebook has announced it wishes to launch an Exchange Traded Fund (EFT). The Facebook ETF will be based on Libra, which is a Digital Asset backed by a basket of currencies. Therefore it is not completely dependent on the fortunes of the US$, which it would be if it were backed by an asset that is priced in US$ (like gold), which is what the Editor of Forbes magazine is calling for.

Libra’s acceptance has received a boost from the third biggest economy in the world, Japan, as the Japanese Financial Services agency believes that Libra is unlikely to be a Cryptocurrency. It has stated that Libra will more likely be categorised “as general money transactions and remittances.”

The massive profits that fund managers have generated for years and their annuity style income (they earn a fee based on the funds that they manage, so having much greater visibility of their revenue) has meant that asset managers enjoy a high PE ratio. Blackrock’s PE is currently 16.8, although this pales into insignificance compared to Facebook’s current 23.35, as investors believe that Facebook is able to grow its revenue and profits faster than many other public companies!

If Facebook focuses more of its attention to asset management, and Libra is just the start of a series of products and services Facebook is going to offer its users, then traditional managers need to pay very careful attention. Facebook has both the cash and the followers to become a substantial asset manager extremely quickly, and also has massive exposure in parts of the world which are growing fast, and where its younger citizens are already digitally engaged!


Asset Management
There has been considerable hype about how tokenising property will boost liquidity, as it will allow smaller investors access to this asset class which historically has been the preserve of institutions and the very wealthy.

Whether this is true or not, we will have to wait and see, but we are beginning to see different parts of the world tokenise property and slowly we are seeing more and more acceptance of the idea.

In France, a €6.5 million property in Boulogne (according to Forbes) is the first piece of Real Estate to be tokenised. The property was transferred to a joint stock company and held by 100 tokens, following which each token is then capable of being divided into 100,000 tokens. This means that, for as little as €6.50, one can own a fraction of the building. In the USA last year, a property in New York, valued at over $30 million, was tokenised and was touted, at the time, as being a way to finance property instead of relying on traditional banking arrangements.

Meanwhile, a company called ASA, based in Dubai, is looking to tokenise property in the UAE and Portugal. Also in Dubai, a company called Darico, has recently launched a service to help organisations tokenise assets, such as property, into tokens. 

So, one can see that a number of jurisdictions are looking at how property can be held in a different way and, while the promise of additional liquidity that tokenisation promises is yet to be seen, there are a number of other interesting benefits that tokenisation of assets offers. In essence, we are increasingly finding that economies are becoming more and more digital as this can offer greater transparency, stronger compliance monitoring and regulation, thus enabling engagement with people who are, themselves, more digitally savvy and reliant than previous generations.


Real Estate
MetLife, the US quoted insurance company with over 90 million customers worldwide, is piloting a project in Singapore called Lifechain.

The other firms involved with Lifechain are  Press Holdings and NUTC Income, which collectively are trying to simplify the process for relatives when someone dies. Once an obituary is placed in The Straits Times, these details are sent to LifeChain which forwards a consent form to the relatives and the deceased’s National Registration Identity Card is entered on to Lifechain. Lifechain will then search to see if the deceased had any valid life insurance policy in force. If a policy is found, then a claim will automatically be submitted so the claims process can commence.

It is estimated that, in the UK, there is over £2 billion of unclaimed life insurance, as relatives do not know that their loved ones had insurance policies, and the insurance companies are unaware that one of their insured clients has died. In the USA, according to the National Association of Insurance Commissioners, over 24,900 people in the just the last 2 years have tracked down life insurance policies and claimed over $360 million.

Insurance firms are looking at a variety of ways that Blockchain technology can be used. In the UK BlockClaim, which was developed at Imperial College in London, has recently secured £500,000 of funding for a platform that uses Blockchain technology for claim management, and AI to help as a fraud filter. The platform scans phone calls and emails to search for irregularities in a claim to try and identify fraud, while also managing the claims process more efficiently. The intention is that claims can be paid faster, while spurious claims can be queried and rejected. 

Also in the UK, Legal and General has announced that it is going to use Amazon’s blockchain expertise to launch estua-re, the first Pension Risk Transfer (PRT) reinsurance platform. The intention is that estua-re will handle every stage of the PRT reinsurance process, including pricing, claims handling, financial reporting and collateral and utilising data stored on a Blockchain. Using this new platform, it is believed that costs-savings can be generated, as well as creating much greater transparency. It will enable a secure record of information that cannot be altered, but easily retrieved by different parties about annuities - potentially in 50 years’ time. Legal & General Group's PRT transactions include the largest U.K. risk transfer to date, in 2018, when British Airways insured £4.4 billion in liabilities of its Airways Pension Scheme.

Blockchain technology is being used in the insurance sector more and more, as organisations understand how to utilise Blockchains’ secure, transparent, real-time characteristics. Increasingly, more transactions are being digitised and Blockchain technology enables the insurance companies to offer products that are more suitable and efficient in our digital economy.


International Crops Research Institute for the Semi-Arid Tropics (Icrisat) is exploring how it can use a Blockchain-powered platform called Elenev01, from India, in an effort to see how small Indian farmers can improve their productivity and revenue from selling the crops they are growing.

These improvements are hoped to be achieved by reducing the number of intermediaries involved,and allowing farmers to have more information about price of goods and connecting them with potential retailers, which is increasingly vital as merchants are being asked to prove the provenance of the goods they are selling. 

Blockchain technology is also being used to record and share farm-data as, by having one trusted secure ledger of information, it eliminates the challenges that are so common in the childhood game of “Chinese whispers”. Data and information on crop yields, soil conditions, moisture levels, etc., can easily be misinterpreted, as records are passed from the farm through a chain of different third parties so that, after three of four times, this information can easily be misunderstood from what the actual real data is saying. The Kansa State University has produced a report that offers a summary of some of the above challenges and how Blockchain technology is able to address them. Blockchain technology is able to help agricultural supply-chains to track the provenance of agricultural goods and, using sensors and Internet of Things (IoT), it is possible to monitor the conditions that goods have been kept in, from farm to retailer.

In Sri Lanka, Aon, the global insurance firm, has teamed up with Oxfam and Etherisc to offer insurance to 200 small farmers so they can protect themselves from damage to their crops due to extreme weather. Bojan Kolundzija, the country director of Oxfam in Sri Lanka has said “Allowing farmers to access the blockchain platform is an important milestone that is bringing an effective and affordable risk transfer mechanism to a large portion of the Sri Lanka economy.”

Blockchain technology is able to automate much of the traditional claims process, as the farmer will not need to submit a claim and the insurer will not need to incur the cost of sending claims’ adjusters to inspect the damage. Therefore, the cost of processing and handling the claim is faster, cheaper, and more trust is generated. Thus confidence is created to encourage smaller and often less-sophisticated farmers to protect their livelihoods.

There have been a number of interesting announcements around the use of Digital Assets with some interesting products and companies receiving the green light from regulators.

In Europe, we have seen a Luxembourg-based business called Argento emerge and, from the UK, The London Block Exchange has launched what it calls “the world’s first genuine bitcoin (BTC) bond”. This new bond being issued by LBX, which is regulated by the UK FCA, will enable institutional investors to buy a bond that has no exposure to fiat currencies. It will have its own International Securities Identification Number (ISIN) code, and its price will be on all Bloomberg terminals i.e. another example of Crypto being adopted and accessible to institutional managers.
In the UK, Token Market, which had been very active promoting Initial Coin Offerings, raising over £240 million for 30+ companies funded by 170,000 investors, has had approval from the FCA to issue its own Security Token Offering (STO). The Token Market STO goes live on 8th July 2019 and will pave the way for Token Market to launch further STOs - all of which will be subject to much greater regulatory scrutiny, compared to 5,597 ICOs that have been launched to date. Once again pioneers like Token Market, offering STOs in a regulated manner, will make it easier for institutions to be more engaged with this asset class  - not least because these Digital Assets will be backed by assets i.e. bonds, property, shares in companies. 
In February 2019, the London Stock Exchange invested into a UK-regulated company called Nivaura, which has now issued both digital bonds and equities using Blockchain technology. Euronext, a Dutch-based stock exchange that has over 1,300 companies listed with a market capitalisation of over €3.5 trillion, has invested €5 million into Tokeny, which is based in Luxemburg. This investment in Tokeny will compliment Euronext’s investment in Liquidshares, where it joined a consortium of 15 other organisations. Liquidshares is a post-trade Blockchain-powered solution, connecting asset managers’ and broker and custodians’ information systems, thus enabling them to more easily invest in and process listed and non-listed European SMEs.
However, the regulators are also showing some signs of caution, with the UK FCA announcing that it wanted to ban the sale of “Crypto derivatives” to retail customers. It is understandable that the FCA has taken this stance, as crypto derivatives are a highly-geared way in which to get exposure to, in this case, an unregulated asset – Cryptocurrencies. While many have generated high returns, Cryptocurrencies are themselves very volatile. Furthermore, the Cryptocurrencies which largely have been created via an ICO are typically not listed, nor traded, on regulated exchanges. However, as we see more STO’s being launched which can be admitted onto regulated exchanges, such as Token Market, it will be interesting to see if the FCA allows derivatives on these Digital Assets.

Meanwhile, in the USA, there has also been some caution and concerns being raised in particular about Facebook’s new Libra-Cryptocurrency, with the House of Democrats asking Facebook to halt developments until the regulators and congress have had the opportunity to review the potential risks. This is unlikely, as Libra has been established in Switzerland, which is...

Digital Assets

2 Weeks Ago

The gift card market is reported to be going to grow by over 15% p.a. in the next four years from $585,311 million to over $1,591,461 million according to Allied Market Research.

As more retailers understand the benefits of such schemes, and as increasingly such schemes migrate to become digital using mobile phones. Given the growth in e-commerce and the demand for cashless payments, gift cards are increasingly being used. However, it is possible to convert gift cards into Cryptocurrencies like Bitcoin.
Given some gift cards have an expiry date, if you cannot make up your mind about what to buy, you may wish to consider converting your Gift card into Bitcoins. It is now possible to do so using companies like Paxful, who according to Trust pilot, is a credible firm, but as always, exercise caution as there may be people on their platform who could be up to nefarious activities! Allegedly, Paxful was the 4th busiest Bitcoin wallet in 2018, in terms of transactions, doing over 20,000 deals a day. It is possible to change your Crypto to a gift card and then buy an iTunes gift card and then use this to buy a new iPhone or MacBook.
There is no reason why you cannot also convert Cryptocurrencies into gift cards and so solve the dilemma that many merchants do not accept Cryptocurrencies as payment. For more information on you may want to read “How to convert your Amazon gift card to Bitcoin”.
It is also possible to convert you loyalty rewards - air miles or credit card loyalty scheme points into Digital Assets although there seem to be fewer organisations currently offering this option. Searching the internet you will come across “BitMiles” but it would seem that caution is needed, as it has had some poor reviews i.e. according to TopCoinList it could be a scam, so caution is required!
Alternatively, Loylogic, who were established in 2005, has a global network of more than 500 merchants and 2,000 online stores offering millions of products and services that operate loyalty reward schemes. Loylogic themselves, since 2017, offers loyalty rewards to Crypto conversion service.
However, why do merchants bother with loyalty schemes? Well, there is no doubt that being a “Farmer, not a Hunter” i.e. looking after your existing clients and encouraging them to do more business with you as opposed to searching for new customers, is financially a very sound business strategy. In an article in Outbound engine they stated the following:
·         Acquiring a new customer can cost five times more than retaining an existing customer.
·         Increasing customer retention by 5% can increase profits from 25-95%.
·         The success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is 5-20%.
According to an analysis from Invespcro, existing customers are 51% more likely to try a new product and spend 31% more!
As we see more loyalty schemes digitising, we potentially will see more and more tokens/coins/reward points being given away to customers to attract their attention and build brand loyalty. However, there will be increasing pressure for these rewards to be interoperable i.e. exchangeable...

Gift cards
Despite the economic sanctions that Iran faces, the lights burn brightly in Mosques across Iran as their electricity is provided for free by the Iranian government.

This has led to a surge of interest in Bitcoin mining which is being seen as a way around the sanctions and enable Iranians to earn some much-needed foreign exchange. Unfortunately, according to an article in Forbes, Mostafa Rajabi Mashhadi, a spokesman for the Energy Ministry, has been quoted by Iranian news agencies as saying that electricity consumption increased by 7% in the past month alone and he was clear where the blame lay: “A bulk of that unusual increase is because of the activity of bitcoin miners,” he said, adding that their activities are “making the grid unstable and causing problems for other users.”

Due to cheap state-subsidised electricity, it has been reported that Bitcoin miners have been moving to Iran from China, Spain, France, Ukraine, and Armenia.

According to Oxford University researcher Mahsa Alimardani: “Mosques receive free energy in Iran. Iranians have set up Bitcoin miners in them. There’s around 100 here, producing around $260,000 USD a year. This money goes a long way in Iran’s choked sanctioned economy,” 

This type of news will not please those countries who have imposed sanctions on Iran, and if the proceeds of these Mosque based Bitcoin profit are not used correctly, no doubt some religious leaders inside Iran will raise questions. However, it does serve to illustrate how complex and difficult it is to totally control and police digital businesses!


Bitcoin Mining
Netflix has produced a documentary to explain who some of the people who have been pioneering Blockchain technology and who are the early adopters of different Digital Assets. 

It is thought the Netflix documentary will help to inform most people who have no idea about Digital Assets, other than what they have heard about Bitcoin. Unfortunately, most people associate Blockchain, Bitcoin, Ponzi schemes, Money laundering, and other nefarious activities altogether. To be fair this may be due to Bitcoin being used as a choice of currency on the illegal and now closed “Silk road” website.

As Blockchain technology and Digital Assets are being used by governments and multinational corporations, we are all going to be exposed and I suspect using this technology and new asset class more and more.

To see this TV show go to https://www.netflix.com/gb/title/80154500

The labour market in Asia is changing, and according to the headhunter Korn Ferry, by 2020 the Asia Pacific region (APAC) will face a labour shortage of 12.3 million workers at an annual opportunity cost of US$4.2 trillion!

Blockchain technology is playing an ever-increasing role in Asia, and this was highlighted in a report from LinkedIn. LinkedIn’s report has broken down what they understand to be the three most prevalent skills country by country compared to the average in the APAC region.

As the graphic indicates, Blockchain skills are required in a number of different countries.

LinkedIn analysed the skills listed by its members from the APAC region over the last five years to identify the top 10 rising skills. They found Blockchain to be the fastest growing skill in Singapore and among the top three in China, Japan, Taiwan, South Korea, Hong Kong, and Vietnam. Although this ought to come as no surprise, as a report back in 2017 by Cognizant identified up to 88% of financial businesses in Asia Pacific who believed blockchain to be important to the industry’s future. This was further supported by Global Market Insights in 2018, who predicted that the Blockchain-based industry in Asia Pacific to be worth about $16 billion by 2024, with the healthcare market contributing at least $1.4 billion.

Currently, Singapore is 7th globally out of all the governments measured by the E-Government Development Index (EGDI). The EGDI has been designed as a way to measure how much governments are embracing digital technology to promote access to public services for their citizens. It is thought that Blockchain technology will be able to offer greater transparency and so help fight corruption and fraud.

As an article in Asian Block review summed up: “British politician Lord Acton, “Power tends to corrupt, and absolute power corrupts absolutely.” Therefore, it may be preferable to trust technology instead of people.”


Labour Market
On the face of it, why would Ripple (a cutting-edge technology company) want to invest in MoneyGram, which is a USA-quoted international payment transfer business?

Surely, Ripple has enough on its plate trying to replace the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the platform that has been used by global banks since 1973 to make international payments? Ripple’s token price increased by over 35,000% in 2017, sparking a Cryptocurrency frenzy globally.

While MoneyGram can trace its roots back to the 1940’s, it was not until 2004 that it was trading as a separate entity. Unfortunately, despite its well-known brand internationally, it has been struggling of late as it looks to repay its $902 million of debt. It was also fined $120 million in the USA for failing to stop potential fraudulent payments. In January 2018, it had a $1.2 billion bid from the Chinese company Ant, blocked on the basis that it would enable the Chinese to have too much financial information on US citizens. MoneyGram’s share price has fallen from $17.81 in April 2017, to $1.67 in December 2018, although on the announcement of the investment by Ripple it did rise by 150% to $3.64.

While Ripple claims that it can help MoneyGram improve the efficiency of payments, cutting costs and reducing the time it takes to send money globally, I suspect it is MoneyGram’s existing distribution network that appealed to Ripple…..

Will we see more new Crypto firms buying into more “old money” companies as they look to introduce their new technology into existing customer-bases?


Alternative Investments
Japanese railways are looking to go cashless and potentially introduce payments using Cryptocurrencies.

The Japanese equivalent to Amazon, Ratken has announced that it is going to provide the technology to help East Japan railway customers pay digitally, as opposed to using cash.

The Japanese government has been trying to encourage its citizens to use less cash and increase the amount people pay using digital methods to 40%. Currently, 20% of transactions in the Japanese economy are paid digitally, compared to South Korea where 89% of transactions are paid digitally, and in China, the figure is 60%. Indeed, some companies, like Paypal in Japan, have resorted to extreme measures such as giving away 10 billion yen ($91million) to encourage people to move away from cash and go digital.

The Ratken East Japan Initiative is looking to enable 5,000 trains stations and 50,000 buses, as well as 600,000 stores, all to be in a position to accept digital payments.

Given the growth in Chinese tourists (7.5 million in 2017), shops and restaurants are also looking to be able to accept cashless payments. These tourists are more likely to want to pay digitally, as in China only 40% of transactions are paid for by cash. Alipay and WeChat have had huge success in converting the Chinese population to pay digitally, so Chinese people typically to do not carry around large amounts of cash.

To meet this demand from merchants to go digital J-Coin, which is a new digital currency payment platform, has been launched in Japan by Mizuho Bank in conjunction with 60 other financial institutions.

Being able to pay digitally cannot come too soon for Japan as it welcomes the World Rugby Cup this autumn and then the Olympics in 2020. It is expected both sporting spectacles will attract a huge number of foreigner visitors, many of whom will prefer not to use cash simply because it is more convenient to pay digitally.


Digital Payments
The Food and Drug Administration (FDA) has joined the Mediledger project (including IBM, Walmart, Pfizer, Cardinal Health KPMG), which is hoped will be rolled out in the summer of 2019.

The US pharmaceutical industry is worth over $450billion p.a., according to the independent statistical data company, Statista.

The US Drug Supply-Chain Act, which was announced back in 2013, is due to come into force in 2023, and the FDA is looking at how Blockchain technology can be harnessed to provide greater transparency and also evaluate methods to enhance the safety and security of the drug supply chain. According to the FDA Pilot Program website, “FDA’s DSCSA Pilot Project Program is intended to assist drug supply chain stakeholders, including FDA, in developing the electronic, interoperable system that will identify and trace certain prescription drugs as they are distributed within the United States.”

The intention is to reduce the time taken to track and trace stocks of pharmaceutical drugs and monitor the drugs’ integrity i.e. ensure they are kept at the right temperature. It is hoped that the results of the project will be made available by the end of 2019.

This is yet another example of where governmental bodies (in this case the FDA) are actively working with commercial organisations, using Blockchain technology to meet common goals and requirements. If this project is successful it will enable greater transparency, while improving the efficiency of the pharmaceutical drug sector.


Supply Chain
The above question is often asked - now we think we can offer some guidance. Though not in the short term though!

So, why is this the case? Well, Binance - which is one of the world’s biggest Crypto exchange - has a turnover of over $1.5 billion worth of Digital Assets a day, and just announced (despite only 15% of its turnover coming from the USA) that as of September 2019, it will offer a separate Digital Asset exchange for US investors and another exchange for non-US investors. Therefore, it would appear that it is unlikely in the near future that it is going to be possible to have one global exchange that anyone, regardless of where they live, can trade on.

However, with a G20 meeting being held on June 28th  2019 in Osaka, Japan, Crypto-exchanges are on the agenda. Maybe we will see some clearer guidance being given about how Crypto exchanges are to be regulated going forward.

The Financial Action Task Force (FAFT), which is an intergovernmental body established in 1989, and which focuses on money laundering and terrorist financing, will be presenting its recommendations on how Crypto-exchanges ought to be regulated before the G20 meeting. Although, given the traceability and transparency that Blockchain technology offers and the fact that you can, in effect, programme-in checks and balances, could make FAFT obsolete! Such checks are impossible with the current largely paper-based analogue systems and platforms that we currently use, but will FAFT see it this way?

Furthermore, Binance has also been in the news recently announcing that it is going to launch a stablecoin, pegged to £ Sterling, called $BGBP. Binance believes that by offering this new £-backed Digital Asset, it will encourage more people into the Digital Asset sector.

Digital Assets
The Shoppers Drug Mart, which is the biggest drug store in Canada, has over 1,200 shops and has turned to Blockchain technology to help verify the provenance of cannabis supplies - as this is vital for patients using cannabis for medical purposes.

A Blockchain platform offers the promise of greater transparency of supplies while not compromising the privacy of users.

While medical cannabis has been legal since 2001 in Canada, using cannabis for recreational purposes was only legalised in 2018. According to government data, 5.4 million Canadians have bought cannabis since October 2018, and 600,000 have done so for the first time. However, the Canadian government is insisting that companies keep a monthly record on how much marijuana they have grown, harvested, sold, destroyed, used for research purposes or lost to theft. 

Cannabis sales are expected to reach over Can$7 billion next year and given the various data hacks and cyber-attacks the Canadian government are looking at how a Blockchain-powered platform can help both the private and public sector maintain confidence and reporting in this recently legalised industry. Canada is one of the first governments to legalise recreational use of cannabis, so no doubt other countries are monitoring the pros and cons in order to decide if they legalise cannabis for recreational use too!


Supply Chain
The Chair of Russia’s Central Bank, Elvira Nabiullina, has admitted that various central banks are investigating the possibility of issuing a Central Bank-backed Digital Currency.

The general stance in Russia towards Digital Currencies seems to be softening, as it had been very anti these assets. It was only just last week in Russia the Central Bank admitted that it would consider using a Cryptocurrency, backed by gold, for international settlements. Russia currently holds over $492 billion of gold which, if Digitised, some could be used to settle outstanding international debts and be a way around the economic sanctions Russia is subject to.
More and more governments are looking at Digital Currencies as a way to create more transparency, so minimising their “black economy” and, by using Smart Contracts, they could offer the potential to introduce an automatic collection of taxes - which would be faster and potentially more efficient for revenue authorities. 
Interestingly, Russia has a lot to gain from embracing Digital Assets as it is a big producer of commodities. These assets typically only trade for a few hours a day and only 5 days a week. A Digital Asset pegged to different commodities could help reduce the volatility of these commodities, and provide an alternative way for Russian companies to raise capital, so getting around the aforementioned sanctions. In Germany, BSAF’s new electric car battery factory, which has been built to use commodities such as palladium and produced by Nornickel (the huge Russian commodity miner), would potentially benefit from Digital Assets. This has not been lost on Nornickel as it has been discussing with Swiss regulators the idea of establishing a digital platform to offer tokens based on palladium and nickel. 
According to reports in Bloomberg, Vladimir Potanin, the Russian billionaire and CEO of Nornickle, is interested in creating new Cryptocurrency backed by palladium.
These Digital Assets could allow Nornickel to raise capital and potentially avoid sanctions.
Anything that can reduce the costs of trading in commodities has to be welcomed, and such Digital Assets could offer an interesting New Asset class for investors, as well as creating potentially greater liquidity and low commodity volatility for existing institutions.
Indeed there had been some reports, in February 2019, that Russia would develop an oil-backed Cryptocurrency. 
More recently, on the back of the announcement from Facebook about its new Libra Digital currency, Russia has said that it will not legalise Libra. In an interview with local radio station Kommersant FM, Anatoly Aksakov, Chairman of the Russian State Duma Committee on Financial Markets, said “With regard to the use of Facebook cryptocurrency as a payment instrument in Russia at this stage – my opinion is that. in our country, it will be banned.” 
Unfortunately, recent reports that the biggest ever hack of a Cryptocurrency exchange on  Coincheck, in Japan, (where it lost $530 million in January 2018) will not endear any regulators, including Russia, to Cryptocurrencies.
Nevertheless, Russia’s Agency of Far East for Investments and Exports is reported to be looking at creating a Cryptocurrency hub in the Chinese Russian border, on an island called Bolshoy Ussuriysky. This island falls under the national border of both Russia and China! Has Bolshoy Island been chosen for...

Digital Assets