A Year Ago

Last week the German Bundestag moved closer to allow German banks, as of January 2020, to be able to hold and trade Cryptocurrencies, thus amending the Fourth Money Laundering Directive which prohibits banks from dealing in Cryptocurrencies.

Interestingly, Germany has drafted a new law which will enable its banks to be more engaged with digital assets. However, the new bill is insisting on the need for ‘separation’, which means digital assets must not originate from the same legal entity as other banking transactions. This may help to explain why several numbers of global custody providers such as Fidelity, BNY Mellon, State Street and Northern Trust are gearing up to offer digital asset custody, as many banks will have to use these types of custodians.

If we are to see banks starting to trade and hold digital assets for clients, there is a concern that it will encourage people to switch from traditional stocks and shares into more volatile Cryptocurrencies. Indeed, Economist, Fabio de Masi, was reported as saying, “The banks are hot on profits from crypto transactions. But financial consumer protection must not be undermined”. However, as we see other countries (like Switzerland) changing their law to allow digital versions of publicly listed companies, such as Unilever and Novartis, the new German laws being proposed will allow banks to offer these types of Digital Assets to their customers too. Elsewhere in France, Blockchain technology is being embraced as in Paris we saw the launch of “The Garage”. This is a group of Blockchain-interested start-ups joining forces aiming to enhance Europe’s position in the global Blockchain sector. Switzerland is changing its laws, like Germany, as it is looking at proposals to alter nine federal acts, covering both civil law and financial market law. A press release from the Swiss Federal Department of Finance stated Switzerland wants “to create the best possible framework conditions so that Switzerland can establish itself and evolve as a leading, innovative and sustainable location for fintech and DLT companies”.

In a survey carried out by E&Y, it was found that “over 80% of clients express interest in financial advice and planning, yet half remain on the side-lines. These idle clients present a huge untapped opportunity for the industry: the providers who can engage them can lead the way in reshaping how wealth management is delivered to satisfy complex personal needs”. Creating digital versions of various assets, such as mutual funds, bonds, equities, commodities as well as alternative assets i.e. Intellectual property, individual buildings, Private Equity funds, Venture Capital funds or Infrastructure funds that can be traded via a mobile phone, 24/7, is true innovation. We are getting closer to this being a reality and potentially challenging existing wealth managers and product providers (such as banks and asset managers). Indeed, the CEO of Australia’s Stock Exchange, Peter Hiom, recently said when speaking about Blockchain technology, "We believe we'll stop talking about this technology in a few years; it'll just be how data gets shared I think this technology is still in its early stages and this will take time to be deployed and everyone will have their entry point. Ours just happens to be clearance and settlement.”

There have been many articles about how Cryptocurrencies and, in particular, Bitcoin, are an uncorrelated asset i.e. it does not ‘go up and down’ at the same time as other investments such as equities and bonds.

Correlation of Bitcoin versus other asset classes

As the chart above illustrates Bitcoin has, in the past, proved to have minimal correlation with many other asset classes and so, on the face of it, could be an ideal investment to enable one ensures greater diversification in a portfolio.

Indeed, on a risk-adjusted basis by having just a small exposure of 1% to Bitcoin, it would have improved the risk-adjusted returns for an investor. Institutional investors often look at the performance of assets using something called a Sharpe ratio. In very simplistic terms the Sharpe ratio offers a way for investors to determine if they have been compensated. If they have their investment grow in value, for the amount of volatility (the degree to which the investment has gone up and down) that they experienced.

World Wide Web
Bitcoin continues to dominate the Cryptocurrency market, accounting for over 63% of the entire capitalization of this Asset Class.

This figure is potentially underestimating the significance of Bitcoin, as many of the 5,200 tokens that have been created from ICOs were funded by Bitcoin and Ethereum. Therefore, if you excluded the value of Bitcoin from those tokens that were initially funded using Bitcoin and rise and fall on its “coattails”, the real impact and importance of Bitcoin would be revealed. However, as we see more Security tokens being issued, which will be backed by real assets such as property, equities, commodities and bonds, the dominance of Bitcoin is likely to lessen. 

The European Central Bank (ECB) published a report, entitled ‘Understanding the crypto-asset phenomenon’. The report outlines the ECB's plan to develop a monitoring framework of the cryptocurrency market. 

Will we see statistical reporting and analysis by organizations, like the ECB, dividing their reporting on Cryptocurrencies between the current largely unregulated digital assets, that were mainly created as a result of an Initial Coin Offerings (ICOs), and the new regulated Security Token Offerings (STOs).

Source: Cryptocompare and ECB calculations


We continue to see trading volumes grow, as illustrated above, and greater institutional involvement as Facebook, Walmart, JP Morgan, etc announce the potential launch of their Cryptocurrencies. There is going to be a need for higher quality analysis and reliable data for regulators, investors and institutions alike.


High-quality Data
The UK Financial Conduct Authority (FCA) has been in consultation with organisations involved with Cryptocurrencies and, following its statement in 2018 that it would offer further guidance, has now issued a press release confirming how it will be regulating different types of Digital Assets.

The FCA has categorised Digital Assets into four groups, broadly in line with the guidance that it gave in its consultation paper CP19 in January 2019, as to the way tokens will be regulated, giving the industry much-needed clarity. However, be assured all Digital Assets will need to comply with FCA money laundering regulations - which is to be welcomed:

  • Exchange tokens – will be treated as being “unregulated” and therefore will not be under the remit of the FCA e.g. Bitcoin ought to be an Exchange token, but there is some doubt if Ethereum is one too.

  • Security tokens – are classified as “specified investments” and will be under the FCA’s domain, which means that any organisations dealing in security tokens will need to be regulated.

  •  Stablecoins – for those tokens backed by “Fiat”, these are to be treated as e-money and fall within the FCA’s remit to be regulated. This is consistent with current regulations, as one does not need to be authorised to trade bank deposits i.e. if you offer a service whereby you manage someone’s “cash” by moving it between say $,€, Yen CHF, £, etc, but all held within a multi-currency deposit account, you do not need to be authorised by the FCA!

  • Utility tokens – these, in “most circumstances”, will not be regulated and therefore not the responsibility of the FCA. 

Many tokens, especially during the ICO mania of 2017/18, claimed to have been utility tokens but may find that the FCA now classifies them as security tokens, which could prove a regulatory challenge for the firms that issued them and their advisors.

A firm can issue security tokens without needing a regulatory license, in the same way, that issuing shares do not require a license. But in many scenarios in which the tokens are traded, the advisers and brokers handling the tokens, and the financial promotions regime, will need authorization”, it was stated by the FCA. It then went on add, “If a security token is tradeable on the capital market, it will further be considered transferable security under the European Union’s Markets in Financial Instruments Directive (MiFID), and that regime will apply too”.

It is worth noting that if an asset is not regulated and falls outside the scope of the FCA’s regulation, then investors will not be covered by the Financial Services Compensation scheme or be able to take any complaint they have about such an investment to the Financial Ombudsman!

The FCA guidance is a positive step forward for the Digital Asset industry as it would appear that there is, without doubt, interest in the digitisation of many asset classes, enabling markets to operate more efficiently. The FCA’s latest guidance gives compliance staff in banks, brokers, asset managers and professional advisors greater clarity to position themselves, as they increasingly become more engaged with Digital Assets.


Financial Regulation

2 Years Ago

The number of Digital wallets continues to grow, with Coinbase recently announcing that it now has over 30 million users on its platform - a growth of 5 million in just the last ten months!

The independent statistical research company, Statitsica, claims there are only 40 million Digital wallets in existence globally. Can Coinbase really have 75% of all wallets?

Source: www.Statitsica.com

According to the website Blockchain.com, as at 22/07/2019, there were just over 40.6 million Bitcoin wallets so it would appear that potentially Statitsica’s stats may be a little out of date. 

One has to be careful when looking at statistics, as according to Finder.com, 97% of Brits are yet to buy a cryptocurrency and 31% have not bought because they believe it’s too high a risk. However, the figures Finder.com is quoting in its June 2019 article were taken from a survey carried out in 2018!

Nevertheless, Digital Assets continue to be a niche asset class although, with Facebook’s announcement wanting to launch its own Digital Currency, Libra will potentially massively increase the number of digital wallets.


Digital Wallets
Digital Assets
In Digital Bytes in May 2019, there was an article about how various Premier League football clubs are introducing tokens as a way to engage with fans.

This idea is now being considered by Club Atlético Peñarol, in Uruguay, that could be used by fans to pay for tickets, as a type of loyalty scheme, as well as getting access to discounted club merchandise.

Also, in South America, two Brazilian football teams, Atlético-PR and Corinthians, have reportedly signed partnerships with Hong Kong-based crypto start-up Inoovi, which recently launched its “IVI” token, specifically for football clubs. Inoovi is looking at offering fans access to Virtual Reality and 360º streaming technology, so allowing fans an experience as if they were actually attending the match.

Meanwhile, in the USA, The Miami Dolphins football team have recently agreed to adopt Litecoin, which has a market capitalisation of over $6 billion, as its official cryptocurrency coin. Charlie Lee, Litecoin’s founder and managing director, said “This collaboration propels Litecoin in front of an audience of millions of people around the world at a time where adoption of cryptocurrencies continues to gain momentum and the ecosystem is able to support real-world use cases in ways previously not possible. We see this as a powerful way to raise awareness and educate people about Litecoin and cryptocurrencies on a tremendous scale.”

These examples of how Cryptocurrencies are being used globally by sporting clubs illustrate how sentiment is turning more positive to this New Asset class, and organisations are understanding how they can use them!


Digital Assets
The USA tech giant Oracle is working with the World Bee Project to develop a Blockchain-powered platform that will offer assurance on the sustainability of honey production.

This will also offer comfort to buyers that the honey is from sustainable sources as it will provide full transparency of the honey-supply chains. This is welcomed by those involved in buying and selling honey due to the recent concerns over fake honey in Australia, as it has been found that some honey has had sugar syrup from cane or corn added.

Fake honey has proved to be a real challenge in Australia, but an Israeli firm, called Security Matters, has developed a solution using both Blockchain technology and an innovative process that can track honey at the molecular level. Security Matters has created a commercial version of a technology that was developed at a nuclear research facility by the Israeli government. This innovation can introduce a permanent and irremovable marker, or code, to any matter be it gas, liquid, or solid, thus enabling a product to be tracked. To further enhance provenance, Security Matters will record all the details in a Blockchain. This will ensure that every step in the supply chain of the honey is visible and traceable.

Meanwhile, in Brazil, coffee farmers will soon have access to a Cryptocurrency called “coffeecoin”. According to a report on Bloomberg, coffeecoin is being launched by one of Brazil’s biggest arabica-coffee co-operatives, Minasul. The coffeecoin will enable coffee farmers to buy machinery and fertilizer as well as non-farm products like cars and food. 

Coffeecoin is part of Minasul’s strategy to encourage farmers to embrace new technology. As a result, they will be able to sell coffee beans via a mobile phone thus cutting out unnecessary intermediaries and, by using coffeecoins, allow farmers greater transparency of the price of coffee beans.

Coffee beans are the second most traded commodity globally after crude oil, with estimated market size of $100 billion, and this is due to grow by a further 4.7% in 2019! The fact that a Cryptocurrency is being introduced into Brazil (which is the world’s largest producer of coffee) will no doubt mean other major coffee-producing countries, like Vietnam and Columbia, will be looking with interest to see how successful coffeecoin will be in making the coffee market more efficient and how much it helps Brazilian farmers.

If coffeecoin is a success, other commodity producers will probably look to create their own version - “wheatcoin”, “corncoin”, “tobaccocoin”, etc. - which, provided there is sufficient liquidity for these coins, could this then offer an alternative way for commodity traders and investors to get exposure to these commodities?

Potentially, Cryptocurrencies (backed by commodities), which could trade 24/7, could form part of the asset allocation for a global digital currency. Facebook’s Libra is reportedly going to be linked to a selection of just fiat currencies. However, a global currency may prove to be more appealing to different jurisdictions if the digital currency was linked to a variety of different assets, with less reliance on the US$!


The way Cryptocurrencies are treated by different governments varies depending on which jurisdiction you look at.

Facebook’s Libra Digital Currency would appear to have polarised those who are more receptive than others. In India and China, Libra has not had a positive reception, with both governments potentially banning Facebook’s Crypto from being used by their citizens.

There has been mixed news from the USA, with Trump tweeting “I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behaviour, including drug trade and other illegal activity....” Although also in the USA, the Federal Reserve Chairman, Jerome Powell, seemed to contradict Trump.  Powell likened Bitcoin to gold, as a speculative form of value. Powell did not say Bitcoin is like gold, but how some Bitcoin’s users currently treat Bitcoin as if it were! He was stating what his thoughts were. However, it does offer a degree of legitimacy to Bitcoin’s claim to be a digital replacement for gold!

However, in the USA, there is a draft bill to try and prevent large tech firms to launch their own Cryptocurrency. The situation in the US was aptly summarised in a recent article in The Cryptoeconomist: “The current exclusive administrators of monetary policy, whether direct or indirect, do not seem to tolerate competition very well, but their reaction so far still appears to be fragmented and disorganised. However, it cannot be excluded that at some point they will be able to organise themselves and develop effective reactionary measures”
The French are less positive on Libra, with French Finance Minister, Bruno Le Maire, saying during a radio interview that Facebook’s latest foray into Cryptocurrencies “must not happen.” However, the French have confirmed that they are looking to introduce legislation so that companies, which voluntarily abide by standards on capital requirements, consumer protection and pay tax in France, will then receive approval from the regulator. Authorities in France are encouraging the European Union to create European-wide standards for Cryptocurrencies. Indeed, the French are looking at unveiling their own regulations around custody and asset management of digital assets, digital exchanges and Cryptocurrencies. In Singapore, regulators have actively tried to engage and embrace Cryptocurrencies as its Payments Service Act specifically includes Cryptocurrencies and domestic as well as cross-border transfers. In the third-biggest economy in the world (Japan), the view of its regulator the Financial Services Agency (FSA), which oversees Crypto exchanges, is that under current regulations, stablecoins are not considered to be a Cryptocurrency. Indeed, we have already seen one of Japan’s biggest banks, Mizuho, earlier this year launch a stablecoin pegged to the Yen.

The UK seems to be taking a more accommodative approach, with the FCA having pioneered the highly successful “sandbox” which allows regulated companies to, in effect, experiment and trial products and services. The soon-to-be Ex-Chancellor of the Exchequer, Phillip Hammond, confirmed that in his opinion the British government would not stand in the way of Libra.

Turkey plans to be the First Country to Issue Central Bank Cryptocurrency, according to reports from Coinape. Currently,...

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
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
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
Visa, who according to Forbes, handled over $11.2 trillion of payments in 200+ countries last year, is now looking to attack the international money transfer market - which is said to be valued at over $125 trillion.

Since 1973, Society for Worldwide Interbank Financial Telecommunications (SWIFT), headquartered in Belgium, has dominated the market for international payments. However, SWIFT uses old technology, making it relatively slow and expensive to move money around the world, which is why Ripple is arguing that it is able to replace SWIFT, as Ripple’s Blockchain-powered solution is so much faster and cheaper. If indeed Ripple is successful, it would make the business extremely valuable. This may explain why Ripple rose in value by over 35,000% in 2017 and caught the imagination of many Crypto-enthusiasts, as well as sparking a wave of “Fear of Missing Out” (FOMO) across dinner tables around the world and people searched for the next token that could offer them the hope of early retirement.

Visa has also announced that it is going to expand the number of countries from not just the UK, but to six more countries - Spain, Germany, France, Italy, Ireland, and Holland - by now enabling Coinbase to expand its Crypto to fiat debit card for clients. The card allows users to spend in Euros and Sterling, then their Cryptocurrency holdings will automatically be sold to meet the fiat equivalent cost of the purchase. The Coinbase card is attractive for those that travel overseas, as it will reduce the normal expensive foreign exchange fees that many other cards levy. Unfortunately, so far the reaction has not been that positive, with the card scoring only 2.4 on the Google App store. However, new upgrades are promised, which hopefully will improve the customer experience.

Initiatives, like the above from Visa, have to be welcomed as they are driving down the costs of sending and spending money globally while making it much easier for holders of Digital Assets to access their investments in easy and convenient ways. It ought to make it easier to redeem digital loyalty rewards, which are being touted as an important market for Digital Assets. Companies are looking to use Digital Assets to attract new customers while incentivising existing clients to do more business. We are seeing companies offering to pay for clients’ data, as opposed to just collecting it and then reselling it to advertisers - Google and Facebook have been doing this for years!

IOTA has been giving tokens to drivers of Jaguars and Land Rover vehicles during tests in Ireland, it collects information about road conditions and traffic congestion. Facebook has just announced a project called Study, where it will be paying clients for their data (possibly using the soon-to-be-launched Facebook Digital currency, Globalcoin).

Digital Money
Digital Assets
In January 2018, KodakOne announced that it was going to launch the Kodak coin and, as a result, Kodak Inc share price went up 120%.

The basic idea behind KodakCoin is to use Blockchain technology to help photographers manage their photos by creating permanent, immutable records of ownership. It was believed that KodakOne would make it significantly cheaper and faster to register and sell digital images. The Platform was said to offer a simple, transparent Blockchain-powered worldwide royalty accounting, licensing, and payment system. The KodakCoin was never a part of Kodak Inc but was a separate company that licensed its name from Kodak Inc. While KodakCoin’s Initial Coin Offering (ICO) never proceeded, a year on, KodakCoin has generated over $1million in revenue in its beta-test trials.

Kodak Inc is back in the press and this time it is Kodak, the company that
invented the digital camera, and then decided not to commercialise it. This time it is looking to create a Blockchain-powered platform to store and manage documents, all held in the cloud. Kodak claims that its new platform could generate as much as 40% in terms of cost savings, using Blockchain technology.

So second time around, no ICO, no huge increase in Kodak’s share price, but just another example of a global brand using a Blockchain to offer its customers a service to help make business processes hopefully more efficient and cheaper.

Digital Assets
The images below highlight the dramatic results earlier this year in the Philippines, when over 45 tonnes of plastic and rubbish were collected off a beach in Manila Bay.

Plastic Bank and Bounties Network have been encouraging people to collect rubbish and plastic and rewarding the collectors by paying them in Ethereum (a Cryptocurrency). These two companies then partnered with a local Philippine cryptocurrency firm, which itself took the Ethereum and converted it into the Philippine peso.

SC Johnson, the makers of Raid, Pledge, Kiwi, Glade, etc, has been involved in a number of projects in Indonesia, where it has been giving away Digital currencies in exchange for local villages to collect plastic waste. According to a press release, SC Johnson teamed up with Plastic Bank to establish eight plastic recycling centres and is giving Digital tokens as an incentive to pick up rubbish off their local beaches, as “people can then use the tokens to buy needed goods and services – reducing the risk of loss or theft”.

These are great examples of how Digital Assets are being used to encourage positive behaviour and help reduce the amount of rubbish in our communities. This could not be further from how some people few Cryptocurrencies being the preserve of drug lords, terrorists, and generally unsavoury characters.

A little closer to home, in 2017, the
Hull Coin was launched. Whilst it cannot be bought, it can be earned by doing “good work” for Hull’s local community and then spent in local shops to receive a discount. Other towns in the UK have also looked at issuing local currencies, but as yet we have not seen widespread adoption.


At Bond Street underground station recently, what the Americans call an Automatic Teller Machine (ATM) or a cash point machine in the UK, someone tried to convert their Bitcoin into pound notes and it began issuing so much cash the withdrawer could not cope…

As you can see, a security guard tried to keep shoppers and commuters at bay, who looked on in amazement, as used bank notes littered the floor.

The ATM turned into what looked like a Las Vegas one-arm bandit machine that had hit the jackpot, and bank notes were soon flying out of the machine all over the floor… If nothing else I am sure it cheered up the commuters and certainly distracted the shoppers on Oxford Street!

Digital Assets
Facebook is potentially going to offer their staff to be paid in Globalcoin (which is potentially the name for Facebook’s soon-to-be-launched Digital currency) on a monthly basis i.e. as their salary, further illustrating how Digital Assets are coming into our day to day lives.

It is rather ironic that Facebook has been selling advertisers’ data it has been gathering on its clients – generating $16.8 billion in 2018 -  and trust in Facebook has been plummeting. In a recent article, it was claimed that “more than 60% of Americans do not trust Facebook with their personal information”, so why will Facebook customers buy and use Globalcoin? Surely for any medium of exchange – a currency for transactions - one needs to have confidence and trust in the currency? It is potentially for this reason that Facebook has, allegedly, agreed to cede control of the governance of its new Digital currency to an independent board.

Meanwhile, the rollout of Globalcoin is gathering momentum, as it has been reported that Facebook has been in discussions with the Commodity Futures Trading Commission (CFTC) in the USA to help smooth the way for Globalcoin, ready for its launch. It is understood that Facebook is also in discussion with Visa and Mastercard.

Mark Zuckerberg, Facebook’s CEO, recently commented on the future of Facebook saying: Payments is one of the areas where we have an opportunity to make it a lot easier… I believe it should be as easy to send money to someone as it is to send a photo.

Globalcoin is a very significant evolution for the  Digital Assets’ sector, as it will allow
Facebook’s 2.3 billion monthly users, as well as its 7 million advertisers, to use this currency and bypass the traditional banking system. But only time will tell if Facebook’s customers' trust is sufficient to using its new Digital currency.

P.S. As if Facebook needed it! It is being reported that Facebook is going to operate Globalcoin on a closed Blockchain, and charge the organisations operating each of the
100 nodes $10 million, so generating an extra $1 billion. This additional income will be a drop in the ocean for Facebook as, at the end of March 2019, it was sitting on over $41 billion of cash!

Data Analytics
Social Media
This podcast interview with the founder and CEO of eToro, Yoni Assia, is over 1 hr long, but it is worth listening to https://pod.link/1434060078.

eToro was only established in 2007 when Yoni and his brother thought there had to be a more user-friendly way for people to be able to buy and sell shares, currencies and other financial assets. They have achieved this by creating what they refer to as a “social market”. The eToro platform enables someone in Hong Kong to find an investor in Germany (that buys and sells German smaller companies) and then follows and automatically invests in these same companies in the same proportion. This type of ‘mirror-trading’ is also known as “copy trading” and has been popular for a number of years, being possible to do copy-trading with relatively small sums of capital. Typically, the person who is initiating the trading ideas and strategy will earn either a % of the profit (from the person who is mirroring the trade) or a % of any brokerage that is created.

However, I digress - what is also interesting in the podcast is that Yoni was involved in Colour Coins in 2014 which, in effect, were what we now refer to stablecoins i.e. Digital Assets pegged/linked to real assets - $, £, gold, etc. The Colour Coins were run on the Bitcoin Blockchain, as Ethereum did not yet exist. When he was only 19, Vitalik Buterin (Ethereum’s founder) helped Yoni with some of the initial codings for Colour Coins. Vitalik decided that digitising assets was a great idea, but the concept needed a new blockchain - so he invented Ethereum.

From 2015 to 2016, eToro grew by 600%, and then from 2017 to 2018 by a further 400% (according to this podcast). eToro has now become a very successful company, which has over 10 million clients who, in 2018, traded over $1 trillion worth of assets. Yoni believes that, in the same way Bitcoin has proved it can replace cash as a medium for people to trade, Smart Contracts has the ability to replace and totally disrupt the legal system. Smart Contracts can replace many intermediaries and allow computer/machine-driven execution of trades and agreements, which will be cheaper, faster and not prone to human error.

eToro has been offering the ability to trade Bitcoin for over 5 years and, during Cryptocurrencies’ bull-run in 2017/18 Ethereum went from $4 to over $350 and Ripple increased in value by over 35,000% in a year. This encouraged people to open accounts with eToro to such an extent, that eToro signed up over 20,000 new customers in a single DAY! Given eToro’s success in traditional and Digital markets, how much credence ought one pay to its CEO’s pronouncement, that financial markets are going to radically change? The combination of Digital Assets and Smart Contracts disintermediate the financial services sector and could result in 66% of the $150 Trillion global bonds and equities becoming digitised.

Certainly, younger investors are spending increasing amounts of their time online, usually on a mobile phone, and therefore to engage with them, financial service providers will need to communicate and offer services...

Digital Assets
In the UK, Digital payments overtook cash payments for the first time last year, and the trend of using less cash when shopping looks set to continue, with now over 63% of UK consumers using contactless payment.

Contactless technology was invented by Nikola Tesla in 1898, using radio signals to control a model boat in New York. However, it took until 1995 for contactless tickets to be first used in Seoul in Korea to replace bus and rail paper tickets. Finally, in 1997, Mobil petroleum launched “Speedpass” to enable customers to pay for fuel at petrol stations in the US.

However, while cashless payments are proving ever popular, the costs of using even a debit card can be nearly 3%, especially if used overseas. It is estimated that soon credit card costs in the US are projected to exceed $110 billion, although this is largely as a result of the $1 trillion of debt that is held on credit cards.

We are seeing more merchants i
ncreasingly accepting Digital currencies as a form of payment, as illustrated by Whole Foods, Bed Bath and Beyond, Office Depot, Nordstrom, Jamba Juice, Barnes and Nobel, all announcing that they will allow customers to pay for goods using Flexa’s Spedn. The Spedn App creates a quick response, “QR” code, which you can then scan at the check-out, automatically transferring in the local currency, and taking the equivalent amount from your selected cryptocurrency from your Spedn digital wallet.

Spedn potentially is a much cheaper way to buy goods and services when overseas. If it can also accommodate Digital Assets that are given to customers as part of loyalty and incentive schemes, hopefully, we can all start using those old Airmiles, Avios, Nectar, Starbucks points, etc., provided such firms also digitise their platforms.
Meanwhile, last week at Consensus, a Blockchain conference in NYC, the banners above were displayed.

Once we see the likes of eBay accepting Cryptocurrencies as a form of payment, how long will it be before we see Amazon also do the same?

Digital Currency
Financial Services
The 19th of May 2019 could prove to be an inflection point for the mass adoption of Cryptocurrencies/Digital Assets.

A firm called Zulu Republic (Zulu) based in Zug, Switzerland, announced that it was now possible for WhatsApp’s 1.5 Billion users to now transfer Digital Assets, using their Lite.IM wallet. Not only is it now possible to carry out Digital Asset transactions over WhatsApp, but Zulu will also pay users in Digital Assets if they make referrals to other users.

Zulu was set up in 2017, and initially considered launching an Initial Coin Offering (ICO), but managed to attract sufficient private funds. Zulu was also concerned about the regulatory uncertainty around ICOs decided not to carry out an ICO. In order to promote itself to a wider audience, Zulu carried out an “AirDrop” and gave away tokens to people who subscribed to one of their wallets and, according to etherscan , over 4,800 subscribers now have Zulu Tokens. However, Zulu’s systems and scalability are now really going to be tested, as it is possible to use them to over WhatsApp, and having tried to look around Zulu’s website, it keeps crashing - the omens do not look good!

One wonders if Facebook has decided to use Zulu and its Lite.IM wallet as a trial, while it finalises the launch of its own cryptocurrency (which is meant to be launching later this year also on WhatsApp)? Once people are able to easily use Digital Assets to pay for goods and services on a social media platform like WhatsApp, let alone Facebook, with over 2.3 billion users of which 1.56 billion log on every day, will we see many other global brands more fully embrace this New Asset class, so that point of inflection will have occurred?

Social Media