December 20, 2017
By Team Ripple - December 11, 2017 (ripple.com)
Everyone is talking about the digital asset space. Wild price fluctuations, new XRP capital funds and Bitcoin (BTC) forks have made it virtually impossible for consumers or the financial industry to ignore the popularity and proliferation of these assets.
In fact, the digital asset landscape has grown so much that there are more than 1,300 types of assets on the market with a collective market cap of $450 billion as of this posting.
We examined the top digital assets for payments while comparing their speed, cost and scalability. Here’s what we found.
XRP is the only digital asset with a clear institutional use case designed to solve a multi-trillion dollar problem – the global payment and liquidity challenges that banks, payment providers and corporates face. In order to effectively solve this problem, speed, cost and scalability are of extreme importance. When you line up the top digital assets for these attributes, it’s clear that XRP is the winner.
XRP is a key enabler of the Internet of Value — Ripple’s vision for making money move at the speed of digital information. XRP’s speed, transparency, and scalability help financial institutions move money like information moves today — in real time.
It’s no wonder that real institutional customers are using and finding value in XRP and governments, regulators and central banks are increasingly recognizing the role it could play in the global system.
December 14, 2017
By Joe Liebkind - December 14, 2017 (www.investopedia.com)
- founders of Ripple recommend not using their creation as a currency for speculation
- ReRipple has no mining and transactions are powered through a “centralized” blockchain to make it more reliable and fast
- Ripple may be the dividing line that separates two distinct products of cryptocurrencies : assets and solutions
There are many cryptocurrencies out there, each of which gained inspiration from bitcoin, the ancestor to them all. Bitcoin was humanity’s first definition of what it means to be a cryptocurrency, but it is a complicated creature that relies on many special functions and components. For instance, bitcoin has a decentralized blockchain ledger, on which its millions of participants organize and save a record of their transactions. It also has cryptographic hashing, so that traders can use a system of public and private keys to safeguard their identities.
Bitcoin’s transactions are processed by miners, a supportive and incentivized community that keep everything running smoothly. Relevantly, it also has a finite supply. These characteristics have made it easy to transact safely, store value, and even speculate.
Should a cryptocurrency exhibit each of bitcoin’s traits or can any kind of digital money be labeled as such? These are logical questions, but ones that haven’t often been asked, largely because most of bitcoin’s peers have generally stuck to their collective predecessor’s model.
Ripple is a currency gaining popularity after years of living in bitcoin’s shadow, bereft of interest from traders due to its traditional infrastructure that makes a greater compromise between crypto and fiat money. Some in the community have refused to consider Ripple a real cryptocurrency because it’s so different. Are they correct? (See more: Ripple Is Back: Here's Why.)
Ripple: The Strange Hybrid
Ripple wasn’t designed to be a coin, or a normal cryptocurrency by the standard definition. While bitcoin and comparable cryptocurrencies give the value of the coin equal priority with network security, speed, and applicability, Ripple does away with the idea of XRP as any kind of investment asset and instead focuses on making the blockchain as strong as possible. This is primarily for the good of the institutional entities that Ripple serves, like American Express or Santander Bank. To achieve this goal, the Ripple Foundation created XRP but tweaked each traditional component of cryptocurrency into an almost unrecognizable state.
Miners Be Gone
Ripple has no mining or miners whatsoever. Instead, transactions are powered through a “centralized” blockchain to make it more reliable and fast. Mining is a core tenet of most other cryptocurrencies, and each uses their own system to determine how much power the miners have. Some, like bitcoin, use Proof-of-Work, but there is also Proof-of-Stake and Proof-of-Importance.
In cryptocurrency, miners are incentivized to process network transactions with the currency itself, but this has created some issues that Ripple deems untenable. In a solution built for big banks, there should be no separate group with its own special motivations for running the network.
While this idea has helped other cryptocurrencies to remain decentralized, it has also slowed them down: a problem Ripple cannot afford. This lack of mining affects other aspects of Ripple as well, taking it further from the standard.
Plug in the Printing Press
Besides processing transactions, miners are also rewarded with cryptocurrency. This is essentially how it’s created. Ripple’s exclusion of miners naturally throws a wrench into the machinery in this regard. Ripple is not finite, and can be “printed” on-demand, which makes it much more reliable for payment processing, money exchange, and other institutional activities. When it’s used, it’s simply destroyed.
The Ripple Foundation already created the 100 billion XRP currently in circulation, giving it a stable, non-volatile character perfect for its biggest clients. However, this also removes one of the biggest factors in any true cryptocurrency: the ability to accumulate and store value as only a deflationary asset can.
A Centralized Blockchain?
Ripple does have a wallet, but getting access to the blockchain is tough. Retail participants aren’t supposed to have access because it introduces risky, strange elements into an otherwise sterile environment. The Ripple blockchain isn’t open like those of other cryptocurrencies. XRP can be safely stored and kept, and uses cryptography to protect participants, but the nodes it’s protecting aren’t individuals but “trusted” operators registered in the Ripple network. This allows the currency to use the advantages of the blockchain ledger, but in a closed ecosystem that makes it more efficient.
While bitcoin claims to be “trustless,” it’s just created a precarious house of cards whereby everyone has some incentive not to let it topple. Miners can still shut off their computers and freeze the network if they wanted to, but not with Ripple.
Putting a Title on Ripple
Much like the many questions surrounding bitcoin cash, even the founders of Ripple recommend not using their creation as a currency for speculation because it isn’t one. Ripple resembles a fintech platform more than anything else and has simply combined the best elements of fiat money and blockchain cryptocurrency.
Not a “true” cryptocurrency by the standard definition, Ripple may be the dividing line that separates two distinct products to emerge from the cryptocurrency revolution: assets and solutions. While assets can serve as investments placing faith in a decentralized community and the deflationary properties of mining, solutions will dispense with the speculation and instead create platforms that are “technically” cryptocurrency, but not traditionally viewed as such.
November 28, 2017
Bitcoin is a perfect currency, Beyond the reach of any nation-state or cooperative effort to defeat it - Max Keiser
By Ashour Iesho - November 27, 2017 (bitcoinist.com)
Although many experts still believe that Bitcoin, and the cryptocurrency market as a whole, may be in a bubble state, Max Keiser believes that Bitcoin still has room to grow.
CAN BITCOIN REACH $25,000?
Bitcoin is making headlines – again – as it continues to shatter milestone after milestone. Most recently, the popular digital currency passed the $9000 mark and is quickly edging toward $10,000. According to a recent article by RT, well-known American TV broadcaster Max Keiser believes that Bitcoin still has the potential to climb as high as $25,000 before having a correction.
"Up until that price is achieved it looks like we’ll see a pretty strong upward move".
He also believes that the huge inflation rate of major fiat currencies like the US dollar is causing Bitcoin to rapidly rise.
"I think we are seeing fiat currencies in a hyperinflationary collapse against bitcoin".
Keiser posits that one of the reasons behind Bitcoin’s price surge is because it is the perfect alternative to traditional financial systems that are used by banks and other financial institutions:
"Bitcoin is a perfect currency, something that is utterly changing the global finance and market and is putting banksters and the central banks out of business".
Many banks have expressed their desire to work with blockchain technology, but most of them are not yet open to Bitcoin and other cryptocurrencies. The reason behind their reluctance is the fact that banks cannot regulate – and therefore cannot control – the popular decentralized cryptocurrency.
GOVERNMENTS CAN’T STOP IT
Another interesting use case for Bitcoin is bypassing government controls and sanctions. Since many countries around the world are currently under financial sanctions, Bitcoin is an easy and efficient way for them to surpass these restrictions. Max Keiser thinks that the fact that governments can’t stop Bitcoin, is giving it immensely value and trust.
"That’s something that no central bank or country will be able to stop, and it’s becoming a real scenario, a real threat".
An interesting remark that Keiser made in the article, is that Bitcoin might become a “financial black hole” where people are rushing to sell stocks and bonds and transfer that money into the decentralized cryptocurrency. If that happens, there is the very real possibility of a stock market or bond market crash, perhaps even both.
Images courtesy of Shutterstock, Pixabay, Wikimedia Commons.
Interesting Tweets from Max Keiser on Bitcoin:
November 26, 2017
By Gareth Jenkinson - November 26, 2017 (cointelegraph.com)
As Bitcoin powered ahead to a new high for a second week in a row, some have speculated that institutional investors could seek safe haven in the virtual currency in the future. The prevailing rhetoric over the past month has been more affirming than damning of cryptocurrencies, with the likes of Ronnie Moas and Max Keiser predicting new highs in 2018. Speaking to RT, eToro analyst Mikhail Mashchenko says financial institutions could look to Bitcoin if a major financial crash hits global markets.
“The demand for Bitcoin is growing as the crypto market has become less volatile, and an increasing number of professional investors see it as insurance.”
Second-oldest bull market
The current bull market in stocks is the second-longest in history, according to Fortune, having lasted 104 months so far. The longest bull market in history ended in 2000 after an impressive 113 month run. With the current rally getting a bit long in the tooth, many on Wall Street are making contingency plans for the stock market’s inevitable turn. If Mashchenko is right, Bitcoin will have a role in some of these plans.
Mashchenko’s statements come on the back of changing sentiment in the mainstream financial sector. Last week, JP Morgan Chase announced plans to offer Bitcoin futures on the Chicago Mercantile Exchange - an important move by one of the biggest banking and financial services providers in America. Even more satisfying, this moves comes only months after Chase CEO Jamie Dimon condemned Bitcoin as a scam.
Online banking service providers and exchange operators LedgerX and Revolut are also adopting Bitcoin support. The former was recently cleared to offer Bitcoin derivatives as people look to do more than just trade the cryptocurrency.
“LedgerX launched its first long-term options for Bitcoin, with an expiration date of December 28, 2018. In the coming months, we will continue to see the ‘domestication’ of Bitcoin: the Chicago Board Options Exchange and the Chicago Mercantile Exchange are planning to launch tools based on the cryptocurrency in the near future.”
If and when a stream of institutional investors start investing large amounts of capital into cryptocurrencies, some of the stunning predictions made by Bitcoin bulls could well be realised. However, Mashchenko’s prediction was quite conservative, suggesting that Bitcoin reaching a $10,000 high by the end of 2017 would be driven by emotion rather than fundamentals:
“We could see a Bitcoin at $10,000 in a month or so. However, such a surge will be based on emotions, not on fundamental factors. So, further growth of the cryptocurrency will require something more than euphoria.”
November 24, 2017
By Sujha Sundararajan - November 24, 2017 (www.coindesk.com)
Swissquote Bank, an online banking service, has launched a bitcoin exchange-traded certificate that it claims will curb the cryptocurrency's volatility.
The Bitcoin Active Certificate works by moving investor's holdings between bitcoin and U.S. dollars with the help of a machine learning algorithm that forecasts short-term market movements using technical indicators, buy/sell pressure and analysis of social media sentiment.
Swissquote said in a statement: "Our strategy is focused on reducing volatility by increasing the amount of cash held during periods of uncertainty and downturns. This lower-volatility strategy is intended to decrease volatility to help create more consistent potential returns in the long run."
The bank explained it will hold from 60–100 percent of the portfolio in bitcoin, depending on the level of confidence its bitcoin price prediction, while the remainder is held in U.S. dollars. Trading will be carried on the SIX Swiss Exchange, it added.
According to a Bloomberg report, Peter Rosenstreich, head of market strategy at the bank, said:
"Investors are excited about the cryptocurrency but are unnerved by its volatility. So we tried to build a trading algorithm that’s a protection against downside risks."
Notably, the new certificate isn't the bank's first foray into the cryptocurrency space.
Back in July, Swissquote announced a new bitcoin trading feature in partnership with digital currency exchange Bitstamp. The service allows customers to exchange bitcoin with euros and U.S. dollars through their accounts.
Trading screen image via Shutterstock
November 23, 2017
By C. Edward Kelso - November 23, 2017 (news.bitcoin.com)
In order “to prevent the abuse of the system for criminal and unlawful activities and ensuring the stability and integrity of the financial system,” Bank Negara Malaysia Governor Tan Sri Muhammad Ibrahim stated 22 November 2017 that those trading in cryptocurrencies will be placed under the country’s existing anti-money laundering laws.
Malaysia Cites Terrorism Fear
Joseph Chin of The Star Online reports, “Bank Negara Malaysia is developing the regulatory structure for digital currencies, and from 2018 persons converting crypto currencies into fiat money currencies will come under anti-money laundering law,” he notes. Such persons “would be designated as reporting institutions under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001.”
The central bank’s Governor made his remarks at the Third Counter-Terrorism Financing Summit. It’s a four day conference organized by the bank, partnering with “Australia’s financial intelligence agency, AUSTRAC, and Indonesia’s Pusat Pelaporan dan Analisis Transaksi Keuangan (PPATK),” the website press release read.
The gathering brings “together more than 350 specialists and professionals from 35 countries and international organisations to share their insights on the latest terrorism financing (TF) issues and developments,” they emphasize.
Mr. Ibrahim’s talk was titled, Readying the Financial Sector Amid the Evolving War on Terrorism Financing, saying in part, “regulators must prepare themselves as digital currencies will become the new norm,” The Star Online paraphrased.
“We must harness the vast potential in technological innovations,” the central banker warned, “to reinvent and reinforce our lines of defence.”
Terrorism in Malaysia has a storied and long history, and is beyond the scope of the present article. But it is safe to write terrorism is something the Malaysian government can claim as a concern, regardless of it as pretext in the case of bitcoin.
“We need new tools,” Mr. Ibrahim said. “The adoption of artificial intelligence, machine learning, and big data technology are tools that would likely be imperative, as suspicious transactions become more complex and harder to detect,” he listed.
The Star Online notes further how the central bank head “said the advent of digital currencies, as some have forecast, will mark the beginning of a new era in the financial sector.”
Remittances Come Under Scrutiny
One undeniable area of bitcoin’s power resides in its ability to essentially be borderless, allowing those who wish to send money back to their home countries a frictionless experience for the most part.
Mr. Ibrahim is reported to have said “Bank Negara was in the midst of finalising the details of a new requirement for the Banking and Money Services Business sector to report remittances in high risk areas.”
“The high risk areas will be determined based on the law enforcement agency’s intelligence on areas that they view may pose higher risks for funding of terrorism activities,” The Star Online summarized.
The central bank hopes to incorporate more shared international intelligence on suspicious transactions.
As always, what exactly constitutes “high risk areas” and “suspicious transactions” is often left vague by government regulators. It appears to be the same in Malaysia.
A resident of Malaysia told news.bitcoin.com, “Laws are more like guidelines in Malaysia, the people just make their own decisions on what they want to follow. Even if crypto was banned people wouldn’t care. Technically [the song] ‘Despacito’ is banned in Malaysia,” he laughed.
Images courtesy of: Pixabay, BNM. Marcel Chuo contributed sourcing for this article.
Bitcoinocracy is a free and decentralized way to measure the Bitcoin community’s stance on a given proposition. Check vote.Bitcoin.com.
November 20, 2017
By William Mallers - November 20, 2017 (www.coindesk.com)
William Mallers, Jr. started First American Discount Corporation with his father in 1984, eventually building it into the third-largest discount futures brokerage. He sold it in 2001 to Man Financial and then retired.
In this opinion piece, Mallers argues CME Group's plan to offer bitcoin futures will benefit the futures trading industry and the bitcoin community alike – notwithstanding hand-wringing in both worlds about the idea.
I'm a member of the Chicago Mercantile Exchange. I've also been a bitcoiner since 2013. So, when CME Group announced its intention to launch bitcoin futures in the coming weeks, I thought, "Great! Way to go, CME."
The first exchange to offer a futures contract on bitcoin is good news for my CME friends: more trading volume and and speculative opportunities. And it's also good for my bitcoin friends: the legitimacy and access is sure to help with adoption and higher bitcoin prices. Win-win! Right?
Well, that wasn't quite the response I got.
Instead I heard just about every negative stereotype about both futures trading and bitcoin, from both communities. Let's try to put these misperceptions to rest.
'Tulips' in 5,4,3...
First, there’s this from the futures industry’s most widely read blog, John Lothian News:
"The risk of bitcoin is in its history and the cloud surrounding its creation and early fraudulent days. Who is Satoshi? Where is he today? What happened at Mt. Gox? Is it still used to launder money? Why won't China let people trade bitcoin and what does this have to do with money laundering or capital controls?"
Good Lord. If you've been in enough arguments with bitcoin skeptics you know what's coming after the drug-dealing, money-laundering slam, right? Next up: the tulip-bulb analogy.
Sure enough, Lothian says, "I don’t want to be on the wrong side of history. But the history I am looking at is … 1636-37. That was the peak of tulipmania."
And that, my friends, is why I spent my first two years in bitcoin not sharing my passion with any non-bitcoiners. "Bitcoin? Never heard of it."
But because I have benefited from all the hard work that others have done to advance this project – hosting meetups, dispelling misinformation – and all I've done is log into my account and click "Buy," I thought I'd try to do my part.
A margin clerk's dream
Here's what I wrote to Lothian (a former employee at the futures brokerage I ran), and maybe it will help you with your bitcoin futures doubters:
"Hey John, it's Junior from your old FADC [First American Discount Corporation] days and I’ll be glad to help you understand bitcoin.
"But first – recall how you used to try to collect margin money by first asking the customer to provide a contact at his bank who could confirm that he had sufficient funds in his account and that he had initiated the wire. Why did we have you do that? Because we knew we wouldn’t get the money until the next day; his bank, while debiting his account immediately, would wait until the end of the day to wire us the money (unless he stopped the wire) and our bank wouldn’t credit us until mid-morning the next day, at the earliest.
"Now, imagine, instead of that 24-hour headache, your under-margined customer simply waved his cell phone at our FADC QR code and we got the money within 10 minutes, or at most a few hours. Bitcoin is a margin clerk's dream come true: near-instant peer-to-peer value transfer! It's easy to see why Jamie Dimon doesn’t like it, but a former margin clerk? You should be loving this technology and cheering for its adoption!
"I know having an asset protected by the computing power of a globally distributed network doesn't feel as secure as having armed guards protecting a bank vault, but if you get some time, there are websites that estimate the cost of amassing enough computing power to defraud the bitcoin network. This site estimates about $1 billion in electricity per day, plus over $1 billion in equipment, to counterfeit one transaction. In other words, it would be way cheaper for the Hunt brothers to corner today’s silver market than it would be for me to con an online retailer like Overstock into sending me free patio furniture. It's called a '51% attack' because I’d need to control a majority of the network hashing power to get a consensus mechanism to accept my phony accounting.
"Bernie Madoff-style cons are hard to pull off; I need years to earn my victims' trust, I have to get a reputable accounting firm to bless my forged statements, etc ... but Madoff's con was far easier than going undetected while amassing billions' worth of computing power. Plus, since new bitcoins are awarded to the miners proportionate to their computational contribution, if I did have that much computing power, I may as well amass bitcoins the honest way, right?
"That's one of the fun insights into this project: it manages to align all participants through economic incentive."
When Terry Duffy, CME's CEO, says it's offering bitcoin futures in response to customer demand, I'm sure he’s right.
I know from writing brochures for commodity trading advisors that money managers want non-correlated assets. That's the only reason they own gold.
When the stock market tanks or a terrorist attack happens, that's when gold rallies. After 9/11, the stock market dropped over 7 percent, but gold spiked.
Bitcoin, like gold, is a perfect non-correlated asset to add to an investment portfolio. I am not surprised that there is such overwhelming demand for bitcoin futures from traders. Now, every trader is going to have the option to invest right there on their screen without having to do the onerous work of buying and securing bitcoin itself.
As for claims that CME futures trading will put the exchange at risk, they are overblown.
CME clearing privilege requires a large amount of capital. If a member's capital level drops below the threshold required to clear, the CME removes customer accounts and places them with a firm that has the capital to support them. Again, customers come first.
Stock index futures functioned as designed during the 1987 crash, grain futures likewise during the 1988 drought, currencies during the high volatility after the Plaza Accord. Consider this: prior to 1982, if you’d predicted where the most successful stock index contract would launch, you’d guess probably the New York Stock Exchange, right? But S&P 500 Index Futures launched at the Chicago exchanges next to the pork-belly pit, U.S. Treasury futures next to the soybean pit.
CME has done its homework on bitcoin; it's well aware of bitcoin's volatile price history and has the experience and controls in place to clear bitcoin futures.
Amazing, isn't it? The exchange that offers risk-management products should avoid bitcoin because it’s "risky?" Huh? I’ve never seen anything like bitcoin that inspires such lame arguments from its opponents.
This ain't Wall Street
Then, there's all the bitcoiners' FUD: "Here comes Wall Street to drive the price of bitcoin down, manipulate the market and ruin it for us!"
Suffice it to say, for many of the same reasons I gave above, I don’t believe that to be true.
Keep in mind that CME is not Wall Street. The Chicago exchanges have an ethos like bitcoin's: transparency, security, independence and accountability.
To all the people hand-wringing on both sides, let's just see how this plays out. I have decades of experience with the Chicago exchanges and feel reasonably certain that you all are wasting your breath and paying too much for full-page ads in print newspapers.
Let's get this thing to the moon!
Disclosure: CME Group is an investor in CoinDesk's parent company, Digital Currency Group.
Downtown Chicago image via Shutterstock.
Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.
November 18, 2017
More than twenty banks are expected to join a DLT-based trade network being built jointly by partners Singapore and Hong Kong.
By News Desk - November 18, 2017 (cryptovest.com)
Top Central Bankers from Singapore and Hong Kong have confirmed that more than 20 global banks will be joining their partnership to build a blockchain-based trade network.
The development was announced at the Singapore Fintech Festival this Thursday. The project is called the Hong Kong Trade Finance Platform (HKTFP), and is the result of a collaboration between the Hong Kong Monetary Authority (HKMA) and the Monetary Authority of Singapore (MAS). The HKTFP – a pilot which has been described as a global trade connectivity network (GTCN) which will digitize trade finance – is among the first of its kind and is an initiative which is expected to serve as a global model for the industry.
The partnership between competitors Singapore and Hong Kong is geared toward the advancement and promotion of fintech and blockchain, and the HKTFP is a major part of the collaboration. The platform is designed to ensure the smooth transfer of digital data, to facilitate global trade that passes through Singapore and Hong Kong – both major trade hubs.
The launch date for the HKTFP is early 2019, as was announced by the MAS earlier this week; Singapore is likely to target the Asean region with the project, while Hong Kong will be focusing on China.
Currently, however, the DLT pilot is still under development. Numerous aspects are being ironed out, and Li Shu-Pui, executive director HKMA, revealed that banks involved in the project have raised multiple concerns, among them worries about data and transaction privacy. He added that it was imperative for regulators worldwide to start laying down rules for the oversight of blockchain tech, so it could fully play its part in the rapidly advancing trade finance sector.
Both HKMA and MAS also aim to expand the scope of the HKTFP, and expect European banks to get involved as the project develops and progresses.
November 09, 2017
By Tedra DeSue - November 09, 2017 (cryptovest.com)
Bank CEOs continue to be asked to give their thoughts on cryptocurrencies. For his part, Citi’s chief seems to see them as a reckoning force.
Another day, another Big Bank CEO weighs in on cryptos.
This time it was Citi’s chief Michael Corbat. In an interview with Bloomberg, he voiced optimism about cryptocurrencies and the Blockchain technology that underpins them.
Let’s review some of his comments.
So far, Corbat said he hadn’t seen a significant uptick in the number of clients looking to invest in cryptocurrencies. He said demand for Blockchain technology, or access cryptos as an investible asset, has been fairly limited and concentrated.
“When you want to go to the corner store and get a loaf of bread, try to use it, try the experience and you would find it today, in my word, you’ll find it to be a bit clunky. But again we can’t be dismissive of the underlying technology, and ultimately what it represents in terms of the next things that are coming down the pike.”
Corbat seems to appreciate regulators not moving in yet to shut down the use of cryptocurrencies.
“In some ways there’s the challenge that regulation actually stalls or impedes innovation. As an observer, I would guess, or likely say, [that regulators] are intrigued by innovation, and they’re intrigued by the underlying technology.
I think there is a future to digital currencies. And rather than cut it off at this point, let it run a bit. But I do believe that at the point that it truly does become meaningful and difficult to manage around tax collection, criminal activity, tax evasion, money laundering, etcetera, that governments will have something meaningful to say on that.”
Falling in line
The banking industry has the most to lose as cryptos continue march into wallets of consumers. While they still are widely used for purchases, as noted by Corbat, cryptos are steadily becoming more acceptable by the mainstream.
As they do, bankers are weighing in more. We just told you how Goldman Sach’s CEO Lloyd Blankfein recently said he wasn’t going to “pooh pooh” on Bitcoin.
The only head of a Big Bank left on the crypto-hater bandwagon is JP Morgan’s Jamie Dimon.
October 30, 2017
By Noelle Acheson - October 30, 2017 (www.coindesk.com)
Life isn't easy for a startup.
As anyone who has tried it knows, it's long hours, low pay, constant stress and a relentless march into the unknown. But, it's even harder for cryptocurrency startups.
Earlier this week, the UK's Financial Conduct Authority published a report highlighting the difficulty that blockchain businesses have in getting basic banking services. Many are met with blanket refusals, some are given limited access and others get banking support yanked without warning. And the problem is not unique to the UK.
This makes it difficult for cryptocurrency businesses to operate, let alone get started. (Just try paying for your server space with cash.)
It also contradicts the UK government's pro-innovation stance. Officials have often stressed how vital fintech development is to the economy, and have expressed an explicit interest in harnessing blockchain technology. What's more, a report issued a couple of years ago by HM Treasury deemed cryptocurrencies a low risk for money laundering and terrorism financing.
Even some cryptocurrency businesses accepted into the FCA's sandbox program, which exempts them from full regulatory compliance to encourage experimentation, cannot bank in the UK.
The banks in question are, on the whole, reluctant to comment on this, which leaves the startup community assuming that the financial institutions are afraid of cryptocurrencies.
While there may be some truth to that, the main reason is more likely to lie elsewhere.
Not so scary
By now, most financial institutions have a reasonable idea of what cryptocurrencies are and how they work (there has been no shortage of reporting and conferences on the subject). They see their governments probing deeper, some of their peers experimenting with coin issuance, and they know that many of their customers dabble in digital token investments.
Cryptocurrencies are not the misunderstood threat they once were.
And it's not as if the marginalized businesses are asking the banks to hold their cryptocurrencies for them (not yet, anyway – that business opportunity will emerge). The businesses want the banks to help them manage their fiat income and payments. It's still hard to pay electricity bills and rent with bitcoin.
Furthermore, while banks don't like volatility, fluctuating cryptocurrency prices have a secondary effect at best on a startup's fiat reserves.
Reluctance to lend to cryptocurrency businesses is a different matter. It’s not unreasonable for banks to be selective in who they lend to, especially given their squeezed margins.
But this is a problem for all young startups without a track record, not just blockchain ones. And while a loan or two would be nice, what the startups are most in need of is a bank account from which to make payments.
A sharpened knife
So what are the banks afraid of? Unclear regulation, and fines.
The global regulatory clampdown on financial institutions has taken a heavy toll. Banks have paid over $320 billion in fines since the financial crisis, and with over 200 individual regulatory changes a day, it's understandable that they would rather turn down business than risk crippling charges, or possibly even license revocation.
And while a bank may feel comfortable that a blockchain startup satisfies compliance rules today, they have no idea what the rules will be five years from now, and are understandably afraid of attracting retroactive sanctions.
It's not so much the rules that are the problem – banks are used to adjusting processes to comply.
It's the lack of clarity around the rules, both current and future, that acts as an unnecessary barrier to support.
Let them in
To address this, some are encouraging the U.K. government (and others) to insist that the banks provide services for cryptocurrency companies. However, for many, that is skirting too close to government-controlled financial services, which ironically is what most cryptocurrency enthusiasts are philosophically against.
Another option – a simpler, less expensive and less invasive one – is to officially declare that it is "ok" to bank cryptocurrency startups, assuming they meet reasonable requirements. This could take the form of a sandbox-style regulation which absolves certain types of accounts from having to comply with the standard rules.
Or it could be the creation of a new class of entity, with a specific operating license: a special bank for blockchain-based businesses.
This could encourage the birth of a new business model, with fintech startups clamoring to sign up cryptocurrency businesses. The opportunity is significant, given the potential growth in the sector.
It could also encourage banks to establish dedicated subsidiaries to attract a new type of client, to whom they could then cross-sell other services.
The result would be not only a boost to cryptocurrency and blockchain businesses, giving them a safe transactional base from which to operate. It could also help banking to innovate, fintech to find a new avenue of growth, and both to narrow the chasm between fiat assets and blockchain-based ones.
And, as time passes, the financial sector, consumers and regulators will come to realize that the boundaries between the fiat and the crypto world are getting fuzzier – which will, in itself, open up new areas of innovation and opportunity.
Safety deposit boxes via Shutterstock
Noelle Acheson is a 10-year veteran of company analysis and corporate finance, and a member of CoinDesk's product team.
The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday, exclusively to our subscribers.
October 28, 2017
By Jon Buck - October 28, 2017 (cointelegraph.com)
Sergio Ermotti, the CEO of Swiss banking giant UBS, told CNBC that he believes Blockchain technology will “likely reshape” the way that banks do business. UBS is already heavily invested in the new technology, partnering in the Batavia project with IBM, Bank of Montreal, and others.
The statement does not come as a surprise, as companies and institutions have been rushing into the Blockchain space in order to increase efficiency and decrease costs. According to Ermotti:
"Our strategy there is very simple. We try to initiate and get as many other financial institutions and clients into teams like trade finance with other banks and IBM was a successful venture…[allowing banks to] operate and transact at a cheaper, more efficient level.”
Hot on Blockchain, not Bitcoin
Though excited about the possibilities that Blockchain technology holds for the banking sector, the CEO was ambivalent toward Bitcoin. However, rather than taking a hardline anti-Bitcoin stance like his JP Morgan Chase counterpart, Ermotti simply dismissed Bitcoin, saying:
"Not necessarily cryptocurrencies, I think that needs to be defined, but I believe there is a future for blockchain technology, and technology will play a big role in changing and reshaping our industry."
October 25, 2017
By William Suberg - October 25, 2017 (cointelegraph.com)
Bitcoin holders are not the only ones getting free money this quarter as India prepares to inject $32 bln into its banks.
While exchanges in the increasingly important Bitcoin economy announce their perspectives on the Bitcoin Gold and SegWit2x hard forks, legacy finance is getting a “game-changing” government bailout to curb bad loans.
As CNBC reports quoting Goldman Sachs forecasts, India could see economic growth from the giant remedial package, which equals 1.3 percent of the country’s GDP.
GDP growth could rise “up to five percent” a year after the injection, the bank states.
India’s domestic financial institutions have been worrying investors increasingly in the past few years.
Earlier this month, prior to news of the cash surfacing, rating agency Fitch sounded the alarm about the future if banks were not more strongly recapitalized.
"Fitch believes the government will have to pump in significantly more even on a bare minimum basis (excluding buffers) if it is to address the system-related risks of a huge NPL (non-performing loan) stock, weak provision cover and poor loan growth," it said.
Meanwhile, Aswath Damodara, New York University’s so-called ‘Dean of Valuation’ has said he considers Bitcoin a currency and that he is “OK with” its price being at or just over $6,000.
"I think the better path for Bitcoin is to actually make it a digital currency, a currency that you and I can take on our travels and use actually to buy stuff and sell stuff. If that happens, then I'm OK with the pricing," he told CNBC Tuesday.
October 24, 2017
By Darryn Pollock - October 24, 2017 (cointelegraph.com)
Bitcoin has been touted as the currency for the people as its decentralized platform allows for its users to be free of the banking monopoly with their exorbitant fees and charges.
Crippling debt cycles and unbreakable lending policies which are not conducive to economic empowerment have long dogged society forcing the new generation to seek alternative; this is where Bitcoin has come in.
Now, a man in Townsville, Australia, has become a proof of concept for the economic freedom Bitcoin can provide by paying off his mortgage and is funding the development of a new home through profits generated through investing in Bitcoin.
Bitcoin for business
Michael Sloggett first began trading in Bitcoin as a means to pay for overseas acquisitions of supplements for his Townsville supplements store.
But in January this year, he decided to make investments in the currency and the strategy has paid off with the value of the currency soaring from about $900 to $6,000 during that time.
“We paid off the mortgage and bought a block of land at Townsville out of the profits. We are now building a new home,” Sloggett said.
A need for Bitcoin
Bitcoin has been beneficial for Sloggett in both helping him freeing himself from the debt of his mortgage, but even originally, it was the banking rules that made it difficult to transact internationally that drew him to digital currencies.
It all started with his supplement business and the need for international transactions to purchase supplements for the store. Sloggett said he moved to Bitcoin about five years ago because of the expense of paying thousands of dollars in fees for exchange through the banks, as well as the time taken to make settlements.
Because banks held such hegemony over money and transactions, there was never anywhere else to go, but with Bitcoin coming to the fore as a disruptive technology, banks are starting to look seriously outdated.
Sloggett is a new face for the digital currency, proving there is a huge benefit in adopting this new technology if done right. No longer is Bitcoin just for technology whiz kids and hackers; it is helping everyday people survive the harsh world of money and currency.
Sloggett thinks everyone should invest in at least one Bitcoin but warned he had heard “horror stories” of people losing everything by investing with scammers on the Internet.
“Do your due diligence to make sure you are not giving your money away to random people on the internet,” Sloggett said.
“Make sure you are buying from a reputable site.”
October 04, 2017
By William Suberg - October 04, 2017 (cointelegraph.com)
IBM has joined United Bank of Switzerland Group to work on a Blockchain trade platform with major global banks.
The future product, dubbed Batavia, would “help banks and their clients automate the trade finance process, which remains highly manual and paper-based,” Reuters reports Wednesday.
The guiding parties have already involved the likes of Germany’s Commerzbank and Erste Group Bank, as well as Bank of Montreal and CaixaBank.
It is a further Blockchain investment for IBM, which has seen considerable success in the field since it unveiled its IBM Blockchain product earlier this year.
“Trade finance is a perfect use case because there are so many participants in a trade ecosystem especially when you talk of global trade,” Reuters quotes Marie Wieck, a general manager at IBM Blockchain as saying.
“Digitizing and creating a level of trust is a perfect accelerator (for business).”
Batavia’s remit remains fairly vague at this initial stage but should focus on error reduction by giving all trade finance parties an identical self-updating ledger to replace manual in-house record-keeping.
A pilot is expected to take place in the Q1 of 2018.
IBM’s various Blockchain efforts meanwhile have earnt its pole position in a survey this month, which named the corporation as the top enterprise provider after it took 43 percent of the vote.
Microsoft came a distant second, with another 20 percent of respondents favoring its Blockchain solutions.