The Chamber of Digital Commerce’s Smart Contracts Symposium this week included a panel that focused its attention on blockchain smart contracts and the difficulties regulators could face as they try to exercise their oversight power. The panel included two representatives from U.S. regulatory agencies: the Financial Industry Regulatory Authority (FINRA) and the Commodity Futures Trading Commission (CFTC). The representatives acknowledged that both agencies have been closely monitoring the rise of distributed ledger technology.
One of Japan’s largest banking interests, Mizuho, has successfully tested a cryptocurrency that it created in collaboration with IBM Japan as a means to achieve lower money transfer costs. According to a report published by the Nikkei Asian Review, the new digital currency was being tested from July to September, 2016, via an app designed to calculate dinner party participants’ share of the dinner tab.
A new report released this week by blockchain startup Digital Asset Holdings claims that the company has created a blockchain-based platform that will preserve trade confidentiality. If those claims are correct, the platform could help to remove one of the major obstacles to more widespread adoption of blockchain technology by the financial industry. The announcement comes on the heels of Digital Asset CEO Blythe Masters’ recent remarks about sensitive data:
Many people paint a mental picture in their heads of crony capitalism as a room full of old rich guys, smoking cigars, watching the ticker, and counting piles of money freshly squeezed from peasant folk. In reality, crony capitalism is more about the government wielding their monopoly of unquestionable force to choose which private businesses are winners, and which ones are losers. Some might compare crony capitalism to fascist style control over the private sector. Mega corporations and unions have very deep pockets and can buy favors such as subsidies or favorable regulation that can give them an almost monopolistic advantage over small businesses. Governments should instead be championing small businesses and all the real economic benefits they bring to the country, because without a fair and level playing field, many of these small enterprises will fail.
Cryptocurrency can play a role in ending this cycle, helping free markets thrive once again.
On November 30, 2016, tech policy coalition Financial Innovation Now (FIN) publicly called for President-elect Donald J. Trump to commit to the promotion of new FinTech solutions for America’s financial services. The call for action was made in a letter sent to Trump’s transition team and published on the coalition’s website. In addition to congratulating Trump on his electoral victory, FIN noted that the incoming President’s promise of change and lifetime of business experience could place him in a unique position to “make America great at innovating in financial services and growing these jobs here at home.”
The Nikkei Asian Review reported earlier this week that three of the largest banks in Japan had been testing domestic money transfer speeds on the blockchain. Their tests demonstrated that the blockchain transfer speeds are comparable to those seen on existing bank transfer systems. Though the banks have not yet been identified, they reportedly spent much of this past year testing their proof of concept in a research forum that also included Tokyo’s bitFlyer Bitcoin exchange and Deloitte Tohmatsu. Those tests ended in September.
Within the industry, there is a divide in opinion as to whether or not it is a good idea to use web wallets. The lack of trust toward governments and financial institutions, as well as losses suffered due to some unscrupulous exchange operators and other scams, has left a bitter mark on a lot of people. This group believes that everyone should hold onto their own cryptocurrencies. What many of them fail to consider are the obstacles mass adoption faces if the only option people have is to store their funds on a downloaded desktop or mobile wallet.
Downloading a wallet, whether it is for bitcoin or another digital currency, has been a tough sell with the mainstream public. Whether it is because they erroneously feel you need a great deal of technology knowledge, distrust and fear downloading anything, or they simply suffer from sheer cryptocurrency bewilderment, it is clear there needs to be some sort of bridge that makes it both easier to get started and has a degree of familiarity people can relate to.
Chinese investment firm Huiyin Group this week launched a new subsidiary fund called Huiyin Blockchain Ventures (HBV). The funding vehicle will be used to provide investment in Bitcoin-related companies. The fund has been started with an initial $20 million in capital which HBV will invest during 2017. Huiyin also announced that James Wo will be responsible for managing the fund. Wo is the son of the founder of Huiyin Group. Wo will be advised by Andrew Lee, the CEO of Purse.
On Thursday, BitLendingClub confirmed that it will be terminating its P2P Bitcoin lending platform in 2017. The announcement was made in a blog post confirming the details of an earlier email that had sparked a flurry of rumors throughout the day. BitLendingClub cited regulatory pressure as the reason for the planned shutdown, but assured its users that the platform will continue to provide “minimal functionality” for existing users so that current loans can be repaid and funds can be withdrawn. Restrictions on functionality are expected to begin as early as next week.
In a press release this week, the UK’s Royal Mint announced that it will be launching a blockchain-based product called Royal Mint Gold (RMG) in 2017. RMG is the result of a joint effort with Chicago’s CME Group futures exchange, and is intended to provide an innovative way for exchange users to trade gold. The Royal Mint Gold units will each serve as a digital ownership record representing actual physical gold stored at a Royal Mint bullion vault near Cardiff. The trading platform will use blockchain technology to facilitate the digital transactions.
Widening the user base, raising awareness about digital currencies and simply getting the cryptocurrency industry noticed and legitimized around the world are challenges that have existed since the launch of Bitcoin seven years ago. While many people have good ideas regarding the path to take to achieve this, a trend is forming with increased use in areas where there is turmoil in the fiat monetary system itself. Are the problems in India and Zimbabwe a clue as to where the answer for digital currency adoption will be found?
If there is one area where the fiat system has always struggled, it is cross border remittance. Relatively high costs, slow and heavily bureaucratic, the remittance system has been a hindrance to the growing army of global workers who rely on cross border payments. From freelance designers and programmers to web design and writing, these things are done by people all over the world, for client’s in every continent. To streamline this process between Korea and China, and possibly transform remittance forever, Shinhan Bank is launching a new remittance service that uses Bitcoin as the intermediary funding.
A financial derivative is a contract which derives its value from an underlying asset, and almost every asset in the world now has some form of one attached to it. They are purportedly used for hedging risk, and do perform this function in a small number of instances, but the majority of them increase the risk exponentially in search of greater reward. The riskier the bet, the larger the potential payoff. Quite often when the casino (bank) loses on these risky bets, the working class taxpayers end up footing the bill, as we witnessed in the 2008 derivative-driven financial crisis.
There is no money for a bailout when the derivative market unravels again, it’s time we explore new options.
Blockchain is once again at the center of an initiative to improve operational efficiency and reduce costs, this time in the field of correspondent banking. A blog post by the team, comprising of a partnership between Wells Fargo, Swift and ANZ, has described the prototype system they have created using blockchain. Using a distributed ledger to create a real-time transaction log, the system will track payments made on the swift platform to enable banks to track such payments much quicker. The system should offer significant improvements over current methodology.
For the cryptocurrency industry, gaining the trust of the wider populous to grow the user base has always been a critical challenge to overcome. Progress has been steady, but it has, ironically, taken a series of incidents of turmoil within the fiat monetary systems of various countries that has helped the industry grow in that aspect. Now, with the prolonged restrictions placed on the movement of both fiat currency and assets into and out of Venezuela, we are seeing a further shift to Bitcoin. Peer to peer Bitcoin payments are on the increase and web based freelancers are now moving towards payment via Bitcoin, bypassing the fiat system entirely.
In the United States alone, Baby Boomers (those born between 1946 and 1964) are on track to inherit around $12 trillion from their savings-conscious parents who were raised in the era of the Great Depression. Over the next thirty years, these boomers will pass on an estimated $30 trillion to their Generation X children. These two events are on track to make up the largest transfer of wealth in history.
There is however, another potential wealth transfer brewing that could end up being the greatest of them all…
Defining the legal status of digital currencies has become something of an issue, with contrary rulings coming one of after the other, no sooner has one judge ruled bitcoin is not money, another judge in New York, Judge Alison Nathan, rules that it is money and should be treated as such in the case she is presiding over. This illustrates a clear need for legal ruling, especially in the US, to enable the industry to move forward. A final decision is important to the broader digital currency industry and will be needed for new initiatives to succeed.
Blockchain payment company Circle have just announced that with the release of the new iOS 10 software, Apple’s mobile operating system found in all their latest iPhones and iPads, their easy to use instant payment system that allows funds in several currencies, including Bitcoin, will be integrated into the iOS 10 message service, iMessage. Given the sheer popularity of not just Apple’s products, but iMessage as a communication tool, it is often cited as the worlds most used app, this represents an opportunity for the digital currency industry.
Having Bitcoin funds was, in the early days, a means to an end, in that the entire point for owning Bitcoin was to own some digital currency. Things have moved on in the following years, and today the digital currency industry is focused on ensuring that any cryptocurrency is not just easy to purchase, but easy to use, and the more uses the better. It has transitioned from an idea to a platform that wants to be a genuine alternative to fiat currency, and with the latest announcement from Straits Financial LLC, that users of their trading platforms will be able to fund accounts directly using Bitcoin, the industry has taken another step closer to that goal.
Blockchain has become a movement in its own right, the technology that forms the underlying platform for Bitcoin and other digital currencies is being adapted to all kinds of applications today. From insurance documents to identity verification, stock tracking to the veracity of artwork, it seems blockchain has an application everywhere. Now Australian company Power ledger is aiming to revolutionize the energy market by using blockchain to create a market where excess solar energy can be sold directly to consumers. The promise is that of cheaper energy for consumers, and better prices for suppliers, with tests beginning later this month.