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Cryptocurrency Weekly News Recap

Jul 20, 2018

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Developments in Financial Services

  • JPMorgan Chase & Co. has recently filed a patent called “Systems and methods for management of asset or obligation-backed virtual receipts on a distributed system.” The patent will utilize blockchain technology to better manage virtual receipts backed by assets or obligations like bonds. These receipts can be realized as their own tokens on the blockchain and can be used to link the proprietary assets and obligations to their digital identities on the blockchain ledger, with the goals of efficient ownership tracking and transfer.
  • Institutional digital-asset trading solutions firm trueDigital Holdings (TDH) announced plans to develop market maker Bitcoin (BTC) and Ethereum (ETH) price indices.  TDH will be partnering with 10 different liquidity providers including Circle, XBTO Group, Genesis Global Trading, DV Chain, Hehmeyer, and Altonomy. These indices’ reference rates are composed of bid and ask prices from major cryptocurrency market makers and are safeguarded with anti-manipulation software.
  • The Big Four accounting firms, Deloitte, EY, KPMG and PwC, announced plans to test a blockchain platform in Taiwan.  They will be working with at least 16 other banks on the platform which will seek verify company transactions with third parties.  They hope that the platform will aid the obtaining and evaluating of audit evidence – a process called external confirmation.
  • CrimsonLogic, an electronic Singapore-backed government service, is launching a blockchain service platform focused on cross-border trade. The platform is called Global eTrade Services’ (GeTS) Open Trade Blockchain (OTB) and will reportedly streamline efficiency, security, and transparency for international trade purposes.
  • Bank of America (BoA) has recently filed a patent regarding a system to allow the external validation of data using blockchain technology.  The patent cites the need for “providing a more accurate indication of a user’s financial standing by allowing external validation of data in a process data network.”1 This comes after another BoA patent filing for a blockchain-based storage system in April; BoA now has 45 live patents concerning the uses blockchain technology.
  • Mastercard won a U.S. Patent today for a process to speed up cryptocurrency payments. While payments in cryptocurrencies have experienced higher usage lately, there still exists a wide disparity in the processing times. For example, the patent claims that blockchain-based transactions take around 10 minutes to be processed, while fiat payments take mere nanoseconds.1 Mastercard plans to tackle this issue by allowing users to transact in cryptocurrencies that are pegged to a fiat currency, which will use the fiat’s payment rails and security features, but the transactions themselves would represent cryptocurrencies.
  • Abra, a remittance network similar to Western Union and Moneygram, has integrated the ability for users to instantly purchase Bitcoin (BTC) with debit and credit cards. With every transaction, an Abra teller will receive the cryptocurrency sent from the sender, and give the receiver cash or another type of payment. While many credit card companies like Bank of America and Citigroup have banned cryptocurrency purchases, Abra will be using the company Simplex, integrating the credit card systems with complete fraud protection.

Regulatory

  • BitPay, a global cryptocurrency payment processor, has been approved to receive a BitLicense by NY State’s Department Financial Services (NYDFS).  NY-based companies will be allowed accept Bitcoin (BTC) and Bitcoin Cash (BCH) from users globally.  BitPay is the 8th company to receive a BitLicense from NY State’s Department Financial Services to go along with Square, Genesis Global Trading, bitFlyer USA, Coinbase, XRP II and Circle Internet Financial. Cryptocurrency companies need to comply with anti-money laundering (AML), know your customer (KYC), anti-fraud, and other cybersecurity standards in order to be given a license by the NYDFS.
  • Japan’s Tax Agency, the NTA, has announced its new plan to tax cryptocurrency income.  The NTA hopes to create a simplified strategy for taxing crypto income, reportedly only to those earning over USD$1,800 per year. The NTA will be working with the Financial Services Agency (FSA) and other cryptocurrency organizations to roll out the automated profit calculation as part of a concrete tax policy before next year’s tax return.

General News

  • Chairman of the U.S. Federal Reserve, Jerome Powell, discussed cryptocurrencies in front of U.S. Congress today.  While speaking to the House Financial Services Committee, he had a few negative things to say about cryptocurrencies. Powell stated that cryptocurrencies have no intrinsic value and that they pose a significant risk to investors, but that they’re great for laundering money.  He also said he doesn’t think the market for cryptocurrencies is large enough for the Fed to regulate it. After the hearing, a memo was posted stating that Congress will examine the uses of cryptocurrencies and if they should be considered as money.
  • StartEngine Capital, a subsidiary of funding portal StartEngine Crowdfunding has announced that it will be accepting Bitcoin (BTC) as a method of investment.  StartEngine Crowdfunding helps companies with fundraising and this announcement makes StartEngine the first FINRA-regulated funding portal to accept a cryptocurrency. The company started facilitating ICOs on its platform in late 2017, these fundraising companies can now accept investments in Bitcoin.
  • Grayscale Investments, a crypto investment fund, released its first ever Digital Asset Investment report. The report showed a very large inflow of money to its crypto investment funds from January 2018 to June 2018.  During this time, when Bitcoin (BTC) slid from ~$20,000 to ~$7,000, the fund added $248.4 million in new crypto assets, the most amount of money they have raised in any 6-month period, to their $2 billion portfolio.  During this time, Grayscale Investments also added funds supporting Bitcoin Cash (BCH), Ethereum (ETH), Litecoin (LTC), and Ripple (XRP) among others.
  • Bitcoin exchange Paxful has released a plan to CoinDesk on reaching Venezuela’s unbanked population. Venezuela is ridden with hyperinflation and a population in a desperate financial situation. Paxful plans to open an office in Venezuela this September, and release an Android app available for download. Paxful currently has roughly 2 million users and its biggest market is Africa, the continent with a higher rate of unbanked adults than any other. Paxful’s app aims to facilitate the transactions between merchants in the local currency, but using solely cryptocurrency in the background.
  • Leading bitcoin ATM network CoinFlip announced its plan to integrate the cryptocurrency Dash (DASH) to its network of supported coins which include Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Tron (TRX), and OmiseGO (OMG). Dash is a digital currency that focuses on e-commerce and global payments. CoinFlip stated that one of its biggest objectives of the Dash integration is to make cryptocurrencies more accessible and adopted by the public.
  • The Chartered Financial Analyst (CFA) Institute, one of the most renowned financial institutes in the world, will be adding blockchain and cryptocurrency sections to its curriculum starting in 2019.  The material will be included in a broader subject-area called Fintech in Investment Management. Prospective analysts will also be tested on these topics regarding professional ethics. In addition to this other fintech industries such as machine learning and artificial intelligence will be included also.
  • American Express applied for a blockchain patent last week that permits for a payment confirmation, including the ability to confirm the payment amount and identify the merchant.  American Express’s travel branch American Express Travel Related Services Col., Inc. filed the patent, citing uses such as hotel reservations, ticketless event access, and real estate rental.
  • The Financial Stability Board (FSB) has released a framework for monitoring cryptocurrency assets to the G20. The FSB’s framework stresses monitoring crypto market volatility, the size and growth of ICOs, and crypto’s expanding use in payments and institutions. The FSB will also periodically produce qualitative reports on the cryptocurrency markets.
  • Asset manager BlackRock has reportedly started taking an interest in the cryptocurrency industry, especially Bitcoin.  BlackRock is putting together a team to further research into the feasibility of involvement in Bitcoin futures.  Blackrock is already a multi-trillion dollar company and is the world’s largest provider of exchange traded fund (ETFs), so this news should prove beneficial for the crypto industry.
  • The Hong Kong Monetary Authority is reported to launch a new trade solution using blockchain technology with 21 banks in August.  The Hong Kong Monetary Authority has partnered with OneConnect, a fintech subsidiary of Ping An Group for this, and aims to substantially lower paperwork for participants, security risks, and costs.  Once in place, the blockchain platform should also be able to process and confirm certain transactions in one day, when some take up to two weeks.