Weekending 19thApril 2019
Facebook to raise $1 Billion for its Crypto currency
A New York Times journalist has reported that Facebook has been talking to Venture Capital (VC) firms to raise $1 Billion to invest in its cryptocurrency project. Facebook is looking to launch Facecoin in India on its WhatsApp platform later this year, and it is thought Tim Draper, a VC manager who backed Skype, Bitcoin ( five years ago) and Coinbase, is considering to participate and invest.
Facebook is allegedly going to issue a stablecoin, although it is not clear yet whether it will be pegged/linked to the US$, or to a basket of international currencies. Given Facebook‘s global reach of users, a stablecoin based on a basket of currencies could be an interesting proposition. While the concept of investing in a basket of currencies is not new, as it has been possible to invest in such an asset for a while and there are Exchange Traded Funds (ETFs) securities that offer this exposure, a stablecoin that gives exposure to a basket of currencies would be unique as a Digital Asset.
Mark Zuckerberg , the founder and CEO of Facebook, who is reportedly worth over $66 Billion , has spoken a lot about Facebook’s plans to launch its own Digital Currency, and his company now has over50 people working on this project, including David Marcus, the former President of PayPal.
Some are predicting that Facebook is looking to offer an alternative to the US$ and emulate the success that We Chat in China has had, offering a money transfer solution. In any event , with Facebook’s financial muscle and strong balance sheet (as it is sitting on over $40 Billion of cash and investments), it is surprising that it is looking to raise more capital. So, what else is this global titan, which has been the subject of so much recent criticism up to now,and will the launch of Facecoin really enable Facebook to attack the lucrative financial services sector?
There could be a much bigger story here as Facebook looks to further monetise our behaviour and gather ever more data about what we buy and sell, then selling this data to their advertising clients. Facebook could reward users, based on the number of “likes and shares” people make, whether it be on Facebook, WhatsApp or Instagram, as they are all part of the same organisation. How long though will it be before we see Amazon, Apple, Google Microsoft etc issuing their own Digital currencies, by passing banks and governments, in a scramble to be the go -to Digital alternative payment mechanism?
Businesses continue to file Blockchain patents around the world.
There has been a considerable number of patents being issued by companies on a global basis for applications using Blockchain technology, recently including Accenture, IBM and Thomson Reuters. Accenture have filed in the US, a Blockchain patent around the interoperability of Blockchains,which a key concern for corporations as they do not want to be ‘locked-in’using a Blockchain that will not interact with other Blockchains.
IBM’s patent involves the use of data and Blockchain technology for self-driving cars to asses nearby drivers’ behaviour. Colleting data from a variety of different sensors and then calculating the most -likely manoeuvres of nearby vehicles/drivers.
Thomson Reuterspatent, which it as filed in the USA, is aroundstoring identity-related data securelyon a ‘token ‘ on a Blockchain.
One of the reasons companies register patents is to have evidence that they own Intellectual Property (IP) and so increase the intangible assets they possess. It is then possible, depending where the company is based, to enjoy significant tax advantages. Depending on which country a firm files a patent, it is possible to claim tax relief going back for up to TWO years on most of the expenses relating to the creation of the patent, and associated research and development costs. This is significant, as even for small start-up companies it may be possible to offset not just corporation tax, but VAT and employment taxes such as National Insurance.
The chart below shows the dominance of China in terms of Blockchain patents. One of the reasons for applying for a patent in China is that the income derived from an activity that has a patent enjoys a lower potential tax as the burden is reduced from 25% to 15%.Source: Coin Telegraph.
However, while The Chinese government is desperately keen to be an IT powerhouse, a significant % of the patents that are filed in China do not get granted.In 2017 China filed over 1.3million patents, which was an increase of over 600% from the 204.00 in 2008. To offer some context there were 525,00 patents filed in the USA in 2017, which was an increase of 20% from the 429,000 filed in 2007. However, of the 1.2 million Chinese applications only 26% were actually granted, while in the US over 50% of applications applied for, were successfully granted.
Companies globally are often are valued on their intangible assets, such as their Intellectual property and brand value, so having a number of patents helps when they look to raise capital, or when they come to sell the business. This, coupled with generous tax breaks, may help explain the rise in patent applications around the world, although if you wanted to ne cynical patents are being sort to gain some control over Blockchain technology for the future! https://tech.newstatesman.com/guest-opinion/china-patent-rates
Korea’s largest telco will be using Blockchain technology in its new 5G network
KT Corporation(KT) are Korea’s largest telecoms company, are launching its new 5thgeneration internet service and will be using Blockchain technology to provide additional security, which they believe is important especially for the growing Internet of Things (IoT) market. The reason they are focussing on IoT is, that according to KT,99% of IoT devices have been subject to some form of hacking, but KT hope that by using Blockchain technology they can make IoT devices more secure.
Korea has been at the forefront of Blockchain and Digital Asset adoption, and KT had only a few weeks ago announced it was to trial the K Token in a city called Gimpo , in Korea. The K token is designed to help residents and shops in Gimpo to be able to carry out transactions faster and more efficiently, and interestingly is also going to be used to help in social and community projects.
France pushing for Europe to a common way to treat Cryptos
The French Finance minister is trying to encourage other European countries to develop and set of rules as to how Crypto currencies 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.
94% of Universities and Endowment funds have invested in Crypto assets and or Crypto funds.
In a survey of over 150 universities and endowments in Canada, USA and UK, 94% of the respondents said that they had already invested in Crypto assets — 54% directly and 46% using different types of funds, and only 7% said they were looking to reduce their exposure over the next year. The survey, although released recently, was conducted in Q4 2018 i.e. when many Digital Assets prices were considerably lower than they are currently, and sentiment was much more negative to this asset class.
However, the survey revealed that there are still concerns investing in Digital Assets, such as custody, liquidity, and regulation.
Harvard with its $39 Billionfoundation, is reportedly going to invest $11.5 Million in to Blockstack, which will be the first Security Token Offering (STO) that will comply with SEC A+ Regulations, as Blockstack looks to raise $50 million later this year.
Muneeb Ali, co-founder and CEO of Blockstack PBC, said in the press release:
“Blockstack has been working with securities lawyers to create a legal framework that can enable blockchain protocols to comply with SEC regulations. Our framework is consistent with the latest SEC guidance released last week. Upon qualification, we believe that this offering may be the first time a blockchain project receives approval to access the public U.S. securities markets.”
This is clear evidence institutional investors have been buying Digital Assets. As we see more STOs being launched, which will be subject to much tighter regulation, custody providers ought to be able offer their services to these types of assets. This is important as the lack of custody providers is another reason cited as why institutions have not significantly invested in Digital Assets to date.https://www.globalcustodian.com/vast-majority-endowment-funds-testing-crypto-investments/
Why are Twitter, Facebook and Telegram looking at Digital Assets.
The key to success for many businesses is having strong and effect 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. 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 bondmarket , there is also the potential for a successful Digital Currency provider to target these assets too if the formerNASDAQ 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 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 rumouredto be going to launch GRAM and Jack Dorsey, the founder of Twitter, also founder of Square — a financial services payments business are currently hiring engineers as it gears up its Cryptoskills. 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?
London Stock Exchange launches the first of potentially many Security Token Offerings (STOs)
The London Stock Exchange (LSE), which is one of the largest regulated exchanges globally, has issued a 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 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!
ING Bank to offer Mega secure Bullet proof private Blockchains
The giant Dutch bank , ING, has being called upon the cryptographic skills of Stanford University in California, University College London and start-up Blockstream, to offer greater privacy when transferring Bitcoin, by hiding certain transaction details. ING are calling this new method ‘Bulletproof”, and claim it is 300 times more efficient than some other methods of sending Digital currencies. Interestingly this new method may be extremely helpful as way to record data using Blockchain technology and still comply with GDPR regulations across Europe.
Keeping user — information and data private has been a real challenge for exponents of Blockchain technology , and has led to organisations increasingly turning to private or permissioned Blockchains.
Bullet — proof Blockchains could also be ideal for security tokens, especially where the underlying asset is a publicly quote equity or may contain price — sensitive information. It would appear that, as it is now possible using ING’s bulletproof system, it could be possible to carry out transactions using a Blockchain, but not disclose the price of the asset, who is the buyer or seller, or how much is being transacted.
This would be a real breakthrough and would help to allay compliance officers’ concerns within asset managers and banks about having price — sensitive information in the public domain.
Enthusiasts of Digital Assets believe that if user’s transactions can be made private and not available to prying eyes, it might help minimise incidences of scams and frauds, and attract more investors into buying and selling Digital Assets.
How are Central banks embracing Blockchain technology?
In January 2019, Bank for International Settlements, reported that 40 Central Banks are currently, or intend to be, researching and experimenting with Central Bank Digital Currency (CBDC). The Bank of England was one of the first Central Banks to publish research into CBDC, back in 2014 , called “The Economics of Digital Currencies”.
There have been a number of Central banks who have now confirmed that they are working on projects to explore the merits of CBDC, including:
- The Bank of Lithuania is planning to issue “Digital Collector Coin.
- The Bank of Thailand is exploring CBDC for interbank payments.
- The Central Bank of Brazil is exploring using Blockchains for an interbank payments contingency and resiliency system, as well as a decentralized information exchange platform.
- The Eastern Caribbean Central Bank is exploring the suitability of a Eastern Caribbean coin using Blockchain technology.
- The German Central Bank (Deutsche Bundesbank) is exploring Blockchain technology for multiple purposes, including improving efficiency and reducing risk in interbank securities settlement processes with the BLOCKBASTER.
- The Hong Kong Monetary Authority is carrying research on multiple — use cases including trade finance, digital identity management and KYC/AML processes.
- The Saudi Arabian Monetary Authority is conducting Project Aber with the United Arab Emirates, to pilot using Blockchain technology for interbank payments and settlements between Saudi Arabia and the UAE.
- The South African Reserve Bank is exploring CBDC for domestic interbank payment and settlement efficiency with Project Khokha.
- The Swedish Central Bank is investigating a Blockchain-based “e-krona” to serve as an alternative form of central bank-issued money.
- The Bank of France has fully replaced its centralized process for the provisioning and sharing CreditIdentifiers with a decentralized, Blockchain-based solution.
· The National Bank of Cambodia will be one of the first countries to use Blockchain technology in its national payments systems.
· Reserve Bank of India(RBI) and the Indian Banks’ Association is planning to use Blockchain technology to boost digital transactions.
The diagram below aims to illustrate how Fiat and Digital currencies cross over
The IMF have now announced the launch of “Learning Coin, which will have no monetary value, and will be run on a private Blockchain. The coin has been designed to help increase people’s knowledge and understanding of how CBDC could be used by banks around the world. Staff at IMF will be able to earn coins on reaching specified learning targets, and then redeem the coins for gifts and rewards.
While CBDC look appealing regulators in different jurisdictions need to be mindful of privacy, scalability, security challenges, and other unknown risks that any new technology can introduce, before whole scale adoption.
Notre Dame donations to repair the fire damage
Crypto donation sites to help Notre Dame
Owners of Bitcoin, with hours of the news about the fire at the Notre Dame cathedral, were being asked to send funds to help in the restoration of this Parisian building, as fire devastated this 850-year-old magnificent building .The appeal was initiated by a French journalist, and Gregory Raymond, on Twitter, and he hoped such charitable actions by owners of Bitcoin could illustrate to the lawmakers that Digital Assets can be used for good, and not just the small percentage of criminal usesoften cited by regulators and naysayers:
It is not just Crypto donations that are being accepted. CEO of Kering has given $100 million, which owns Gucci and Queen Alexander, and the owner of LVMH has pledged $200 million. Mere — mortals can send fiat too as The Friends of Notre-Dame de Paris has a donation page, or one can use GoFundMeorJustGiving.
There has been some backlash to the amount of money raised for Notre Damewhich within a few days as over $750 Million as some claimed there are worthier causes….
Infrastructure for Digital Assets
DLA Piper announces Digital Securities Alliance with Luxemburg based Fin tech company.
DLA Piper (DLA)are one of the world’s largest law firms, with over 4,900 lawyers and offices in 40 countries and are working with Tokeny, who were set up in 2017 , and bring both traditional market experience and a platform that uses Blockchain technology. The intention is to bridge the gap between Blockchain and finance to help companies navigate them themselves to raise capital in a landscape that is increasingly becoming digitised.
DLA with its global network of offices are looking to offer a cost-effective way to help companies that want to issue a Digital Asset in initially up to 15 different jurisdictions. Working with Tokeny’s platform, depending of where the company is based and in what jurisdiction they want to attract investors from, firms will be able to have access to DLA’s expertise.
The bad news is that Tokeny uses a new acromion “T-REX” (Token for Regulated Exchanges) so investors need to learn this along with ICO,STO,IEO,DPO, Direct Access and good old IPO (as discussed in last week’s Digital Bytes…).
The Digital Securities Alliance that DLA have created with Tokeny is significant, given the number of corporate clients that DLA look after in many different jurisdictions. It will no doubt lend credibility to Digital Assets and encourage reputable organisations to consider how T-Rex (which will be subject to far greater regulation that Initial Coin Offerings (ICOs) in the past) can help firms raise capital.
Digital Bytes has been written carefully to bring attention to developments in the Blockchain and Digital Asset sectors, but readers are recommended to take professional advice before taking any action based on any of the links and information above. TeamBlockchain Ltd do not take any responsibility for any action that may or may not be taken, loss or gain on receiving this edition of Digital Bytes. If for some reason any of the above links do not work, please contact us. If you do not wish to receive future Digital Bytes, please notify us. Alternatively, if you have a colleague or someone that would like to receive future copies please let us know at For more information email: firstname.lastname@example.org