Digital Bytes — review of Blockchain and Digital Assets

EU Blockchain Alliance launched to drive adoption

Over 100 organisations from a selection of different industries have signed up to the newly-founded International Association for Trusted Blockchain Applications (IATBA),

which was spawned from a series of meetings held by the European Commission (EC).
The new members are developers, suppliers and organisations who are using Blockchain technology, with an aim to develop a “predictable, transparent and trust-based global framework”. The IATBA will be located in Brussels, and its intention is to work with governments and regulators to develop guidelines on interoperability (how different Blockchains share data with each other), whilst promoting an open and inclusive global model of governance for the use of Blockchain technology. Members so far include traditional firms like IBM, Accenture, Barclays, BVVA and Deutsche Telekom, as well as companies active in the Digital Asset space, such as IOTA, Ripple, ConsenSys, and Cardona.

The EU has been monitoring Blockchain developments for a while, and in April 2018 it established the European Blockchain Partnership that now has 29members, with Hungary being the latest to join, as it believes the use of Blockchains will be at the heart of public services.To date Euros 141 Million have been allocated by the EU to Blockchain related projects, and potentially up to Euros 340 million could be committed before the end of 2020, to explore how best to use this technology.

IBM have cited five reasons to use Blockchain– ‘greater transparency, enhanced security, improved traceability, increased efficiency and speed’. Interestingly, in a survey carried out by Capgemini, 93 per cent of UK companies, when asked why they were looking at using Blockchain technology, said it was to save costs (compared to a global average of 89 per cent). Secondly, 87 per cent was reducing risk followed by increasing revenues, at 85 per cent.

The fact that organisations like IATBA, European Blockchain Partnership and established global brands like IBM, Facebook, Goldman Sachs, Fidelity Investments, Deutsche Telekom, Mercedes Benz, Jaguar LandRover etc all exploring and promoting the opportunities that Blockchain technology offers, we will see more and more applications impacting on our everyday lives.https://cointelegraph.com/news/european-union-launches-international-association-of-trusted-blockchain-applications?utm_source=newsletter1&utm_medium=email

China approves 197 Blockchain-based firms

Whilst the recent rally in Bitcoin and other Cryptocurrencies has attracted much attention, and with over 100,000 searches on Google on 2ndof Aprilfor Bitcoin in one day, what is possibly more important is the announcement from China’s Cyberspace Administration. It has just approved 197 firms which use Blockchain technology, including some of China’s largest organisations — Tencent,and Alibaba — as China looks to review the opportunities and challenges that Blockchain technology can offer.

This list was allegedly created in response to a number of unregulated Initial Coin Offerings (ICO’s) carried out in China. As a result of this, companies must now be reviewed by the Chinese State Internet Information Office in order to be on the list. Absence from the list could indicate that a company is running unregistered offerings.

In the same way we have seen firms like JP Morgan create their own Blockchain Quorato meet the criteria important to them in the financial services sector. How long will it be before the Chinese develop their own Blockchains and encourage more wide spread adoption, similar to the way they have restrictions around the use of the internet for their citizens?http://en.businesstimes.cn/articles/110149/20190403/alibaba-baidu-tencent-ranks-china-s-first-197-regulated-blockchain.htm

Regulation

SEC puts a shot across utility tokens but decided to take no action

The Securities Exchange Commission (SEC) in the US has told a company calledTurnKey Jets(TKJ), that it will not be taking enforcement action for its Initial Coin Offering (ICO), provided TKJ complies with certain restrictions. These restrictions include: TKJ cannot use any of the capital it raised to build its platform, and the tokens it issues cannot be traded on an external exchange/platform, only held in a TKJ wallet. If clients wish to sell tokens, they can only sell them to TKJ, and it has to be at a discount to the price at which they received them.

It would appear that the SEC are ensuring that there will be no opportunity to make a profit from holding a TKJ token, and whilst it is helpful that the SEC have recognised there is a place for utility tokens, these restrictions will raise questions marks over many of the ICOs which are not able to comply with SEC’s guidance.https://www.ccn.com/crypto-win-sec-admits-not-all-ico-tokens-are-securities

Beware of the headlines

In a recent article it was stated that Security Token Offerings (STOs) are forbidden in Hong Kong.However, if you read the article it also goes on to say that STOs can only be sold if you have the correct regulatory licences. STOs are now widely accepted as being seen and treated by regulators as a security, in the same way that buying a share in a company, like Apple or BMW, is treated. It is not illegal to sell these shares to raise capital, but the company i.e. Apple or BMW as well as its corporate broker, need to follow the correct regulations in each jurisdiction around the world. The reason for STOs being treated as securities is because they will be typically backed by real assets such as property, commodities, bonds or indeed shares in private or publicly quoted companies. Due to the need to be regulated, STOs costs to raise capital are higher than Initial Coin Offerings (ICOs).

Different regulators globally have taken different stances to ICOs, with a number simply saying that ICOs are not regulated in the same way that the buying and selling of a cars or houses are not regulated. While some countries have banned Digital Assets, others have passed legislation to encourage the issuance of these assets. PWC’s 4threport on ICO/STO looked at global trends, the amount of money that has been raised and how legislation is evolving. One of the trends which PWC highlighted is “Asset tokenization, i.e., the conversion of real-world assets to the Blockchain, is a dominant trend in 2019”. As we see greater clarity from regulators, we are more likely to see increased use of Digital Assets by institutions. If this creates more liquidity and the ability to trade 24/7, many assets, which today are restricted to standard trading hours, could result in Digital Assets being a powerful alternative and potentially may actually reduce asset price volatility.https://www.pwc.ch/en/publications/2019/ch-20190308-strategyand-ico-sto-report-q1-2019.pdf

SEC guidance, NOT regulations for Digital Assets

In the USA, the Securities Exchange Commission (SEC) has released guidance on the issuing of Digital Assets and the way these assets will be treated. The inference is that if certain Digital Assets comply with its guidance, then no action will be taken by the SEC, but no doubt each company that has, or intends, to create a Digital Asset will be reviewed on a case by case basis.

The guidance which is called ‘Frameworkfor Investment Contract Analysis of Digital Assets’ attempts to clarifywhether a Digital Asset will be treated by the SEC as a security, and therefore will be subject to federal securities laws. The guidelines explain how the Howey Testmaybe used in relation to Digital Assets, and in particular to Initial Coin Offerings (ICOs).

The SEC outlines different examples which creates the impression that many ICOs which have been launched previously may have breached SEC regulations, as they did not register with the SEC. Potentially some ICOs may have sold tokens that could be classified, under existing federal legislation, as an investment contract. However, Bitcoin would appear not to be in the SEC’s spotlight, as it has been created in a decentralised manner and evolves by miners organically, which may help explain why Bitcoin has performed so well this week?https://cryptonomist.ch/en/2019/04/03/sec-crypto-token-guidance/

Digital Assets

VKontakte- a social media network service and Russia’s most popular website looks to launch it’s own token

Vkontakte was established in 2006, and with over 500 Million accounts, it is the ninth most visited website in the world according to SimilarWeb.It is thought that users of the Russian social media network will be given tokens based on the amount of time the users spend on the Vkontakte’splatform. Tokens earned this way could be transferred between users, to purchase goods and potentially be converted to cash via VK Pay. VK Pay is a money transfer service that lets VK users send money to each other in messages, using a credit or debit card.

This is similar to Facebook’s plans for Facecoin, which is reported to be launching later this year in India on WhatsApp, and follows Line, Japan’s largest social media platform, who which is using Digital Assets.

VKontake’s co-founder Pavel Durov, also founded Telegramwhich raised over $1.8 Billion in 2018 and is reported to be worth over $2.7 Billion personally.

Thesemassive social media firms in three different continents are all using a powerful cocktail of gamificationand loyalty programs to incentivise and reward their customers to spend more time on their platforms. They presumably will be collecting information on what the tokens are being used to purchase, and sell this valuable consumer data to advertisers. https://www.cryptonewsz.com/russian-social-media-giant-vkontakte-looking-to-launch-its-own-cryptocurrency/13472/

Financial services

Federal Reserve: Fedwire goes down meaning US Banks cannot process payments. Bitcoin claims 99.98% reliability.

Fedwireis a real time settlement system used by the US Federal reserve and by US banks to settle financial transactions. In order to maintain confidence in the financial markets, it is vital that Fedwire is always available, so it was not good to see this comment posted on Reddit on 2ndApril 2019–“Today the United States Federal Reserve experienced an unexpected issue and went completely down. No incoming or outgoing wires went through in the entire country. It’s still unresolved and yet not one single news outlet seems to be reporting on this and the massive impact it has”.

Fedwire processed over $2.8 Trillion of transactions on a daily basis in January 2019, but being a centralised system, it will always be more vulnerable compared to a Decentralised system. Bitcoin was created as a decentralised system, and has only been unavailable for 0.02% of the time since it first started over ten years ago. Bitcoinnow has more than 10,000 nodes, so it is very unlikely they will all be non-operational at the same time, thus the attraction of a decentralised mode of operation!

A number of previous Fed bank payments expertshave been recommending for a while that the Fed updates its system, so maybe it will look at Blockchain technology to be part of its upgrade?https://bitcoinist.com/federal-reserve-offline-bitcoin-uptime/

UK £1.4 Trillion Mortgage market to use Blockchain after Aviva invests in FinTech start-up

It typically takes six months to buy a house according to Acre a UK FinTechfirm, that has just received a capital injection from one of Europe’s biggest insurance companies, Aviva. Acre has announced a partnership with Sesame Bankhall Group, one of the UK’s leading firms of financial advisory networks, with over 11,000 advisors. Last year Sesame Bankhall Group placed £42 Billion worth of mortgages, so clearly it has distribution capabilities.

Blockchain technology can create one record that the relevant parties can share in a highly secure environment, so the lender, borrower, lawyers and financial advisors can have access to real time information on the progress of a mortgage application. Given that lawyers and financial advisors predominately are remunerated by charging fees on a time basis, any technology that can improve efficiency ought to be welcomed.https://www.eu-startups.com/2019/04/london-based-acre-secures-e5-8-million-to-transform-the-mortgage-application-process-using-blockchain/

On-line Gaming

Formula 1 to enter on-line gaming market using Blockchain Technology

F1 is partnering with Anomica Brandsto develop an on-linegame using Blockchain technology, called F1 Delta Time. Anomica, which is known for its gamification, AI and Blockchain expertise, intends to use tokens so that players, during the on-line game, can collect and use these tokens for ongoing upgrades. The first phase of the game, based on F1 race tracks, is aiming to be launched in May 2019.

F1 was watched by over 1.5 Billion people in the 2018race season, and with over 63% of its audience under 45, presumably Delta Time is designed to attract and appeal to younger viewers especially in Asia, where economic growth is strong and global brands who typically sponsor F1 want to grow their presence.

The global gaming market is reported to be worth a staggering $137 Billion with over 2.3 Billion gamers. The F1 brand (one of the world’s best-known brands) is highly appealing to get the attention of gamers and a slice of this growing market.

F1 is no stranger to video games, indeed its drivers use them to train as a simulator, and last year Enzo Bonito,who had only used video games, actually beat an Ex F1 driver on a real racetrack in Mexico.

Is it too far a stretch to foresee that in time tokens, which are used in the new Delta Time on-line game, could be used either on F1 race tracks around the world, or be traded on some form of digital exchange? What is certain is the gaming market will be monitoring this new F1 game, which incorporates Blockchain technology, as any novel marketing angle that appeals to this young expanding market will surely be copied quickly.https://thecryptoreport.com/formula-one-launching-blockchain-game-f1-delta-time-2/

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 have a colleague or someone that would like to receive future copies please let jonny.fry@teamblockchain.net

Written by

#DigitalAssets#Tokens #ChairmanGemini #Fintech #Blockchain #Assetmanager #Speaker #DigitalBytes #Economics @Teamblockchain Twitter:@jonnyfry175

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store