3 Weeks 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were just over 40.6 million Bitcoin wallets so it would appear that potentially Statitsica’s stats may be a little out of date.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.

 

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Cryptocurrency
Digital Wallets
Digital Assets

4 Weeks Ago

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!

 

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Cryptocurrency
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Sports

A Month Ago

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?

 

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ICO
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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!

 

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Blockchain
Digital Assets
https://medium.com/swlh/facebook-spur-china-on-...3b82d3f5c5
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.”

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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...


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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.

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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...


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Banking
Blockchain
Digital Assets

2 Months Ago

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).

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In order for institutions to be fully engaged with Digital Assets, they are going to need a third party to look after their assets - a role which has historically been provided by custodians.

The regulators in most jurisdictions insist that the organisations that manage your funds have to be independent of the entity that physically looks after the assets.

The good news is that the options and choices for those looking for custody solutions for their Digital Assets continue to evolve. Metaco has announced that it is using Aon (the world’s second-largest insurance broker) and a group of Lloyds of London underwriters, as they are now able to offer “crime-protection” insurance for Digital Assets held in Metaco’s Crypto-wallet. This means that clients’ Digital Assets will be protected, both when their assets are stored “hot” - online, and “cold” – offline.

This is not the first time Aon has been involved in supplying insurance for Digital Asset custody providers, as it announced earlier this year it was working with Anchor labs in the USA. However, while AON claims to have 50% of the current insurance market for Digital Assets, other firms, as the chart above illustrates, are also active in offering insurance solutions for the custody of Digital Assets.

Another potential new custody provider for Digital Assets is 20/30. Robert Gaskill, from 20/30 (the first company to issue a Security Token, to be listed on the London Stock Exchange), recently told 20/30 is looking at an acquisition in the custody sector. 20/30 is considering buying a firm that integrates its current custody solution and so will offer full insurance for custody of Digital Assets provided by Lloyd’s of London.

Interestingly, we are seeing companies relocating from the Channel Islands (where being a trustee is a regulated function) to the UK, where currently trustee services are not regulated. The reason, no doubt, is that it will save these companies compliance costs. This means they ought to have lower professional indemnity insurance premiums and less capital tied up in the business, as not being regulated the capital adequacy rules are totally different. But why is this relevant?

Well, there are a number of people who believe there is no reason why a trustee could not, in effect, offer a very similar service as a custodian and, because the compliance cost-base is potentially less, trustees will be able to offer this service at a lower price. Assuming that the FCA does not insist that you need to be regulated to “look after” assets for regulated firms, could we see traditional custodians like BNY Mellon, State Street, Northern Trust, JP Morgan or Citigroup, to name a few, offering themselves as trustees as opposed to being custodians?

Given JP Morgan’s foray into the Digital Asset sector by launching the JP Coin, will this give it an advantage over its competitors, as it has potentially a deeper understanding of some of the challenges and opportunities being presented by Digital Assets?

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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.


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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!

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Cryptocurrency
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There are a number of organisations trying to convince investors of the merits of Tokenising different assets classes, on the basis that once it is possible to buy a fraction/share in a property or piece of art or a car, etc, it will enable smaller investors to participate and create a pool of liquidity.

While this sounds very plausible in practice, illiquid assets such as art, property, and classic cars tend to be the preserve of the very wealthy or institutional investors. These asset classes usually have little day to day liquidity, as these more sophisticated investors tend to buy and hold for the longer term. However, the jury is still out since by tokenising these illiquid assets, it will instead lead to other people actively buying and selling on a daily basis!

The Real Estate Investment Trusts (REITs) market started in the USA in September 1960, as a way of encouraging investors to participate in buying property in the USA. This REITs model has been subsequently copied by many other countries around the world.

The statistics below show it is estimated that 80 million people are exposed to USA REITs, which is valued to be over $3 trillion in size, with the majority REITs being quoted on a regulated stock exchange.

It is possible to buy a USA REIT at a discount of its asset value and, indeed, at the end of 2018, the discount of the median RIET was as large as 18%. Therefore, one has to question if there are potentially 80 million investors exposed to over $3 trillion of assets, which one can buy at a potential discount of 18% - how will tokenisation help?

The other popular misnomer has been how Initial Coin Offerings (ICOs) and the tokens they created will democratise capital. To put this a different way, ICOs offered the promise to enable smaller investors to have access to smaller exciting tech start-ups. These have historically been the preserve of wealthy-sophisticated investors and institutions, like Venture Capital and Private Equity Funds. In 2017, Naga, a German publicly quoted company, epitomised this by raising over $50 million from 63,000 people. Unfortunately, apart from a handful of tokens, there is relatively little liquidity in the secondary markets and exchanges for many of the organisations that have issued a token.

According to Coinmarketcap.com, there are less than 100 tokens that had a volume of more than $1million, after which the volumes fall dramatically to a few thousand over most 24-hour periods. But this really ought not to be a surprise, as there are relatively few investors who buy even quoted smaller companies. In the UK, there are 481 companies on the Alternative Investment Market (AiM), that have a capitalisation of between £2+ million, but less than £100 million, and another 272 companies listed on the main London market valued under £100 million. So, just in the UK, we can see there is plenty of choice for investors but, unfortunately, it is almost impossible for even these publicly-quoted companies to raise fresh capital. There are multiple reasons for this - lack of information about these smaller companies, difficulty in valuing the company, few tangible assets being owned and lack of institutional interest, etc. Often there is no liquidity to buy and sell these quoted smaller company shares. How familiar are these reasons cited as to why...


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Bank of New York Mellon (BNY) is the largest custodian in the world, with assets in its custody of $34.5 trillion, and has been experimenting with Blockchain technology since 2016.

However, the first firm it has agreed to look after it’s Digital Assets on a public Blockchain is Bakkt. Bakkt is a company backed by International Clearing Exchange (ICE) which, in turn, owns and runs over a dozen regulated stock exchanges around the world. BNY is keen to emphasise that it is currently providing “safekeeping of Digital Assets for Bakkt” and not providing a custody service for them, partly because BNY feels the need to have far more regulatory clarity before it can offer full custody services.

One of BNY’s bigger custody competitors, Northern Trust, is also looking at offering custody for Digital Assets (according to Forbes) as it realises it, too, needs to keep ‘up to speed’ with how it may be able to offer services for those that wish to deal with this fast developing new asset class – Digital Assets. However, it is not just both the massive and traditional existing custodians who are looking at offering custody services for Digital Assets. Anchorage is a newly launched, crypto-custody firm backed by Silicon-valley based and highly successful VC investors, Andreessen Horowitz.

Bank Frick is a private bank based in Liechtenstein which now has a range of Blockchain-banking services, including Digital Asset custody. BitGo, from California, has been offering for Bitcoins a qualified custodian service since 2018. The California-based company is using its six years of experience as a ‘security-as-a-service provider’ to provide financial institutions and fund managers with Digital Asset custodianship. Also from California, San Francisco-based Digital Asset exchange and wallet provider, Coinbase, added a crypto custody service to its offering in 2018. Coinbase Custody is a qualified custodian which enables institutional investors to store over 30 different Digital Assets securely with a regulated and insured third-party storage solutions provider. Regulated Digital Asset exchange, Gemini, launched its qualified custodian service for institutional investors also in 2018.

Fidelity Digital Assets is the recently launched crypto-venture by Fidelity Investments Inc, which has $7.2 trillion of clients assets. The New York-based asset manager launched its crypto custody service in March 2018. Also in New York, Digital Asset exchange itBit launched a crypto-custody service last year to complement its exchange and Over The Counter (OTC) business. As a regulated New York State Trust Company, itBit ensures that all customer assets and funds are fully backed by mandatory capital reserves.

Alternative asset custodian Kingdom Trust, launched in 2017, was one of the first custodians to provide Digital Asset storage solutions. Currently, the Kentucky-based company has become a market-leading qualified Digital Asset custody service, with insurance provided by Lloyd’s of London. Koine, launched in June 2019, offers Digital Asset custody and settlement for institutional clients. The London-based start-up is targeting trading venues, institutional investors, Digital Asset issuers, and market infrastructure providers.

Prime Trust is a Las Vegas-based qualified Digital Asset custodian which supports Bitcoin, ETH, and ERC20 tokens. Finally, Xapo is one of the longest-standing Bitcoin storage solution providers. In the past five years, the Hong Kong-based company has grown its assets in storage to over 700,000...


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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...


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Cryptocurrency
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Fidelity, the global asset manager which looks after over $6.7 Trillion of customers’ funds, has carried out a survey with Greenwhich, which has a database to interview of up to 3,000 institutions.

This gives Greewhich un-paralleled access to some of the world’s biggest pension, hedge, mutual and alternative managers’ insight. The survey found that 47% of institutional investors thought Digital Assets are worth investing in. The survey also found that 46 percent of respondents like the low correlation between Cryptocurrencies and other asset classes. Of the 441 institutional investors that were interviewed for this survey, between November 2018 and February 2019, 72% preferred to buy investment vehicles that hold digital assets, while 57 % chose to buy Cryptocurrencies directly. Custody continues to be a challenge for institutional managers, with 76% of the respondents saying that security is a problem, and there is a preference for well-known established custodians to offer custody services.

Amazingly, over 22% of the respondents had already invested in Digital Assets, compared to almost 0% in 2016. One suspects that we will see another substantial jump in ownership by institutions as more Security Token Offerings (STOs) come to the market, which is typically backed by “real assets”, as well as being subject to greater regulatory controls.

It is, therefore, no surprise that Andreessen Horowitz, the legendary Venture Capital firm, has generated $10 billion-plus on paper in estimated profits for its investors. Over the next year or so, no less than five of the firms it backed - Airbnb, Lyft, PagerDuty, Pinterest and Slack - are going public. Andreessen Horowitz has also been investing in Blockchain technology-related business and Cryptocurrencies, and itself has just raised over $2.7 Billion.

Another sign of institutional interest in Digital Assets can be seen by the ongoing Merger and Acquisition (M&A) activity, as this is a sign that Digital Assets, as an asset class, is beginning to mature as corporate brokers and organisations look for synergy and undervalued opportunities.

As the graph shows, M&A has been mainly focused on firms which are building the digital infrastructure i.e. exchanges and services that support them, with companies like Kraken being particularly active. So as ever, nothing changes, as it was the merchants who sold picks and shovels in the California gold rush that made money, more often than the prospectors who panned for gold itself.

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Digital Assets
Initial Coin Offering (ICOs) have been used to raise capital by over 5,400 organisations - the largest amount of money being generated was EOS, that reportedly raised $4.3 Billion followed by Telegram with $1.7 Billion, so it is not hard to see why ICOs have attracted so much attention globally.

Unfortunately, it would seem that a number of ICOs are potentially fraudulent, with some estimates saying that over $500 million has been raised for questionable/phony projects. This type of crowdfunding is being replaced by Initial Exchange Offerings (IEOs), which in many ways are very similar to an ICO. The difference is that an IEO is launched and managed by a Digital Exchange, instead of the organisation that is raising capital, itself, carrying out the marketing and distribution of the token. The exchange typically conducts due diligence on the token to be issued and holds and sells the tokens on behalf of the project team. The buyers of the IEO are existing clients of the Digital Exchange, and while this means that there are considerable savings in terms of marketing and promotional costs, many of the exchanges that offer IEOs are charging companies to have access to their distribution capabilities.

It is ironic that ICOs offered the ability for anyone to get access to the potential profits of a token rising in value in a highly decentralised manner. IEOs seem to be moving back to a more centralised model, where investors will need to “sign up” to particular exchanges to get access to individual IEOs and be subject to compliance and regulation. This more centralised style could appeal to regulators, as they may impose regulations on exchanges issuing IEOs and, in effect, treat them like a Nominated Adviser (NOMAD) or a corporate broker.

We are starting to see more asset-backed tokens i.e. Security Token Offerings (STOs) that offer the ability to trade property, commodities, publicly quoted and private shares, and bonds. The institutions that are more likely to buy these STOs ought to draw comfort from this enhanced level of regulation that IEOs may bring.

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ICO
Digital Assets
https://blokt.com/guides/what-is-an-ieo-initial...-explained

3 Months Ago

Binance’s CEO predicts that the number of Crypto users will rise to over 4 Billion worldwide and will outnumber Internet users in a few years.

This is rather surprising, as surely if you are using Digital Assets like Cryptocurrencies, you will need an internet connection.
Although it is possible to even now to transmit Bitcoin and other Cryptos via text messages, as people in Venezuela are doing due to the increasingly frequent electricity blackouts. While the number of people using Cryptocurrencies has allegedly risen sevenfold to approximately 139 Million today, there is still a long way to go before using Digital Assets is an everyday experience for many of us.

However, where Blockchain technology and Digital Assets could have a huge impact, is in remote places in the world where there is no internet connection. The ability to trade goods and services in a very transparent manner, without the need to go through multiple intermediaries, or to have some form of personal identity and so allow one to receive aid, or just open a bank account, can have a huge impact on billions of people globally.

Perhaps this explains why multinational corporations like Boeing, Google, Amazon, and even Facebook are now in what seems to be a battle to launch satellites to be able to beam internet services to earth. The provision of the internet from space allows Blockchains to be made available almost anywhere from The City of London, where I often struggle to make a phone call, to the remotest forests, deserts or oceans of the world.

Indeed, Amazon has recently announced that it is going to launch over 3,200 satellites to improve global internet services, which could be great news for SpaceX, as Elon Musk claims that its share of satellites launches has gone from 20% in 2010 to 65% in 2018. Therefore, it is no surprise that Amazon has just announced its Blockchain as a service solution, to enable companies to establish their own Blockchain solution without the need for expensive soft and hardware. Amazon has already signed up AT&T (a US telecoms company) and Nestle to use the Amazon Managed Blockchain.

One thing is certain, as the world economy is becoming more digital, we need to improve the digital infrastructure, using satellites which provide internet and Blockchain connectivity is becoming commercially more attractive…

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Infrastructure
Internet
Digital Assets
https://bigthink.com/philip-perry/internet-acce...-speed-web
The market for offering custody services globally is massive, with the top 15 providers having over $131 Trillion of assets in custody.

As we see more institutions investing in Digital Assets, we will need to have organisations offering custody services to cater to this new asset class.

This opportunity has not been lost on custody providers, as one of the largest custody providers Northern Trust has for a while been rumoured to be launching a custody service for Digital Assets. Fidelity, Goldman Sachs, and Coinbase are already offering custody services for Digital Assets.

Intercontinental Exchange (ICE), that runs 12 different stock exchanges and with a revenue of over $6 Billion, has just acquired DACC which offer Digital Asset custody services for over 100 Cryptocurrencies for 13 Blockchains. It is understood that one of ICE’s subsidiaries, Bakkt, has applied to the New York Department of Financial Services to be a trust company, which will enable the firm to serve as a Qualified Custodian for digital assets.

Kingdom Trust, which is a US-based custodian, was the first custody provider to get Lloyds of London to ensure its Digital Asset custody service last year.

Nomura, the massive Japanese bank with over 26,000 staff and offices globally, announced last year a joint venture with Ledger and Global Advisor Holdings, (a Cryptocurrency manager based in Jersey in the Channel Islands), to launch an institutional-grade custody solution for digital assets. The three parties have established a company called Komainu, which is looking to offer custody services that will also cover the insurance, regulation, and certification of the Digital Assets that it offers custody services for.

It would appear that we are seeing a reversal to where we were before asset managers relied on nominees and custodians. In the 1970s, due to the huge amounts of paperwork that bearer securities created, nominees like DTCC were created. Interestingly, Digital Assets which can be traded and transferred using Blockchain technology, are not dissimilar to bearer securities as records of the ownership of these assets are not held by a third party.

This means the “bearer” (the person presenting the asset), is paid directly, should they wish to sell. Blockchain technology is able to record the transfer digitally of assets, efficiently and potentially at a cheaper price, and without the need for many of the current intermediaries - all of whom charge fees for their services, so adding to the friction costs of trading securities.
There is an argument that with the creation of Multisig wallets custodians are no longer required. A third party, like a trustee, could be appointed and authorised the transfer of assets from a digital wallet under agreed terms and conditions.

This type of trustee service is currently being investigated by trustee providers, like PTTrustees, for the holders of digital assets. So we can see that, as the adoption of Digital Assets increases, there are new as well as traditional custody service providers beginning to offer a range of services for pension funds, asset managers and banks, and no doubt there will be more to follow…

It is of note that trust companies are moving from The Channel Islands, where they...


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Banking
Digital Assets
https://cointelegraph.com/news/ices-bakkt-annou...dium=email
Jaguar Land Rover (Jag) has been actively investing in various businesses involved with AI and  Blockchain technology for a while as it looks at how its vehicles are going to be more digital, and potentially driverless.

Jag has now announced that it is going to be rewarding people who drive certain Range Rovers and F-Pace vehicles with Cryptocurrencies, in exchange for sharing data about road conditions such as congestion or potholes. Jag has announced it is teaming up with IOTA and will be giving its drivers these Digital Assets, which could then be exchanged for the payment of tolls, drinks or electricity to charge a car. While Jag has not confirmed when this scheme is going to be commercially available, it is already trialing it in Ireland.

Mercedes Benz last year was rumoured to be launching a Mobi Coin to reward drivers who drove in a more economical manner, with data automatically being sent to Mercedes to monitor the way its cars are being driven.

Using Digital Assets to pay people for data, whether that be personal information or about what people are actually doing, is likely to become an important way for companies to track behaviour and then design goods and services that are more relevant and appealing.

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AI
Blockchain
Digital Assets
https://uk.reuters.com/article/uk-crypto-curren...KKCN1S40UP
The London Stock Exchange (LSE), which is one of the largest regulated exchanges globally, has issued an STO worth £3 million on the LSE’s Turquoise platform.

This is the first STO, or as some are calling it an Equity Token-Offering (ETO), for The LSE, and has been carried out within the Financial Conduct Authority’s (FCA) Fintech Sandbox for a company called 20/30.

Nivaura helped with the 20/30 issue, and had previously been involved in launching a bond on the Ethereum network, claiming that by using Blockchain technology the costs of issuing a bond could fall by as much as 65% to 80%.

Nivaura recently raised over £20 million from Linklaters, Allen Overy, and the LSE to develop their business as they believe that Digitising the issuance of bonds and equities for private and publicly quoted businesses is here to stay.

No doubt other exchanges around the world will be keeping a close watch on the LSE, as they will not want London to steal too big an advantage in this sector, which is attracting considerable institutional interest around the world!

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Finance
Digital Assets
STO
The key to success for many businesses is having strong and effective distribution, and this is what Telegram (200+Million), Twitter (300+Million), Facebook (2.3 Billion + 1.5 Billion using WhatsApp and 1 Billion using Instagram) have already done.

So, all three firms, with their existing distribution could enable each one of them to launch their own Digital Currency and try and take a slice of the $5+Trillion foreign exchange market (as estimated by the Bank of International Settlement). On top of this, there are the internal cash, credit and debit card transactions every day within each country across the world, so the potential size of the market to go for is huge.

In the $508 Trillion global publicly quoted equity and bond market, there is also the potential for a successful Digital Currency provider to target these assets too, if the former NASDAQ CEO and chairman, Robert Greifeld is right. He believes that by 2022, all Wall Street financial instruments such as bonds, real estate, and equities will be tokenized. For tokenised, think of digital, and Silicon Valley organisations have many of the digital skill sets needed to become competitors to the traditional Wall Street incumbents.

One of the key factors holding back mass adoption of Digital Assets, is that dealing in Digital Assets is not very user-friendly, but I suspect Facebook, Telegram or Twitter will soon work out how to solve this challenge.

Facebook is looking to issue Facecoin, Telegram is rumoured to be going to launch GRAM and Jack Dorsey, the founder of Twitter, also the founder of Square - a financial services payments business are currently hiring engineers as it gears up its Crypto skills. Jack Dorsey is known to be supportive of Digital Assets, just look at his Twitter feed, so will Square’s Crypto skills be used within Twitter?

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Social Media
Digital Assets
https://bitcoinexchangeguide.com/will-telegram-...major-way/
The French Finance minister is trying to encourage other European countries to develop a set of rules as to how Cryptocurrencies are to be regulated and taxed, following France’s parliament passing legislation last week on how intermediaries handle these assets.

Known as the “Plan d’action pour la croissance et la transformation des entreprises,” (Pacte) it reportedly enables insurance companies in France to invest in Digital Assets.

France is keen to encourage tech innovation and different types of funding that Digital Assets have been using like Initial Coin Offerings. The French are keen to have some controls and regulations, to ensure that investors are protected from fraudulent activities from firms looking to create Digital Assets, but not to protect investors from losses should they occur.

Regulations vary wildly by country within Europe as there is no pan-European legislation. However, local regulators across Europe are imposing restrictions on platforms that do not have the correct permissions to offer brokerage services. The European Union has previously proposed that firms offering services in the Digital Asset sector be subject to its anti-money ‎laundering and countering terrorist financing regulations.‎

As more governments understand the transformational impact that Digital Assets are able to have on their economies, we are likely to see more jurisdictions formulating legislation to encouraging the adoption of Digital Assets. The alternative is, that because these assets are Digital, companies will base themselves in countries that are more accommodative.

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Cryptocurrency
Finance
Regulators
Digital Assets
https://uk.reuters.com/article/us-france-crypto...KKCN1RR1Y0

4 Months Ago

According to a report from South Africa, Bitcoin has little or no correlation with other asset classes, and it has had a far better risk-adjusted return - Sharpe ratio - compared to other asset classes.

Put simply, despite Bitcoin’s volatility, investors have had better performance and been more than compensated, even after allowing for the price has rises and falls.

There has been increasing interest in Digital Assets, illustrated by the number of Bitcoins being traded on Over The Counter (OTC) markets, and volumes for digital exchanges have been growing.

The Chicago Mercantile Exchange (CME) recorded over $540 Million worth of Bitcoin trades on 4th April, an all-time high. This illustrates the institutional interest in Bitcoin, as CME is dominated by large fund managers and banks.

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Bitcoin
Digital Assets
https://www.ccn.com/cme-sees-meteroic-bitcoin-d...m-in-1-day