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Malta Banks Deny Blockchain, Crypto Operators Custody Service

Malta Banks Deny Blockchain, Crypto Operators Custody Service

In the past year, the Island of Malta made a name for itself as it strived to become the go-to-hub for blockchain and cryptocurrency businesses. However, it now appears that startups are encountering problems with account opening in local banks, as banks say cryptocurrency businesses are outside their risk appetite.

Last week, Times of Malta was able to gather information from crypto-related businesses setting up shop in Malta, following the trends of moving from toxic jurisdictions to more a friendly one. According to the news outlet, the sources confirmed that banks were politely declining their businesses.

While risk appetite may have been one of the reasons provided by the banks, another possible one is that the banks may be waiting for more clarity from Malta’s Financial Service Authority (MFSA) before attending to cryptocurrency startups. More so, it seems the banks are having a hard time distinguishing between cryptocurrency and blockchain-related ventures, and are lumping them up as a sum.

According to the Parliamentary Secretary for Financial Services, upon investigating the problem further, he discovered:

“The general understanding is that when it comes to crypto operators, banks are waiting for operators to obtain an MFSA license before opening their doors – which is understandable.”

The MFSA had said earlier that all crypto ventures aiming to operate from the Island should obtain licenses, and while it had said the first licenses would be issued in the first quarter of this year, the International Monetary Fund’s (IMF) interference with the process may have throttled the process, thereby creating a bureaucratic bottleneck.

The IMF expressed worry about the speed in which the blockchain industry in Malta had been developing and wanted more cautionary steps to be taken. In a report enumerating its risk assessment on the financial stability involving virtual-assets, it recommended immediate action on some critical gaps in Malta’s supervision for combating the Financing of Terrorism (CFT) and Anti-Money Laundering (AML). The report further urged gradual enforcement of the laws and regulations.

 

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JPMorgan Introduces Its Own Digital Coin With Institutions in Mind

JPMorgan Introduces Its Own Digital Coin with Institutions in Mind

Major US-based multinational investment bank JPMorgan announced yesterday that it has launched a digital coin that will be backed by the US dollar.

A major breakthrough for cryptocurrencies which had for a long time been blighted in some circles as being untrustworthy, or so would some think. As a matter of fact, JPMorgan was among those in 2017 who ridiculed cryptocurrency and specifically called Bitcoin a fraud. Although its perspective on the subject of blockchain industry as well as properly controlled and regulated cryptocurrencies was that it held promise. Now, it stands as the first major US bank creating a digital coin and one among others in the traditional banking industry to create a real-world application of blockchain technology.

Consequently, this development has aroused some controversial sentiments within the crypto community. According to MarketWatch, Jerry Brito – executive director at Coin Center told the news outlet that the JPM coin isn’t a cryptocurrency but an in-house-built payment system. The bank did clarify on the differences between its digital coin and cryptocurrencies, however, it is a popular sentiment that any product built on the blockchain is assumed to come with the tag ‘cryptocurrency’.

As explained on the bank’s website, it appears that the JPM coin isn’t a legal tender, but a digital coin backed by the US dollar – not a stablecoin either – stored in designated accounts of JPMorgan Chase. The bank said that when one client sends money to another over the blockchain, JPM Coins are transferred and instantaneously redeemed for the equivalent amount of US dollars, reducing the typical settlement time.

The JPM coin will only be used between its institutional clients as the core purpose of the coin is to save time for inter-bank/institution settlements, leveraging the robustness of the blockchain as opposed to legacy systems of money transfers. Accordingly, the coin will not be available to individuals, however, the bank says that the rippling effect in the efficiency of money transfer will confer certain benefits to individuals.

The bank may not stop at the digital coin alone, it said in its news release that with respect to its other businesses like custody or clearing and settlement, “it’s still too early to assess the ultimate impact of blockchain,” and it intends to further explore areas of applicability as it works with clients around the world. Perhaps, it may join the list of financial institutions proposing to offer custody solutions in an attempt to cater to institutional investors willing to join the crypto derivative market once the system is well regulated.

Blockchain-related trends in the banking industry have been growing of late with expanding use cases specific to interfacing with the technology to facilitate money transfers between financial institutions. As reported in December last year, Signature Bank’s Signet may have been the first regulator-approved blockchain-based payment system developed by a bank. It was designed to eliminate third parties and process payments faster between the bank’s clients.

Saudi Arabia and the UAE have been discussing plans on developing a blockchain-based cross-border payment system for inter-bank relations.

Moreover, the subject of a state-backed central bank digital currency (CBDC) has been frequently discussed in many banking circles. However, the views on such development have been rather polarized. Perhaps, this step made by JPMorgan will further facilitate the adoption of different blockchain use cases for other banks as they race for inclusion into the emerging market.

 

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Swiss Bank Vontobel Launches Digital Asset Custody Vault

Swiss Private Bank Vontobel Launches Compliant Digital Asset Custody Vault Solution

Switzerland-based investment bank Vontobel announced today that it is launching a custody solution with a digital asset vault service for its customers.

Per the announcement, this will allow financial intermediaries such as banks and asset managers to offer their customers a more secure and easy way to buy, hold and transfer their digital assets, within an unprecedented infrastructural standard. The product features Hardware Security Module (HSM) technology embedded in the bank’s infrastructure.

One of the largest financial custody providers in Switzerland, the bank touts the new Digital Asset Vault business solution as the first in the world offering “industry-standard quality standards within the established and regulated environment”. Some of the perks include granting owners of the digital asset direct access to holdings with exclusive privilege to their private keys.

Custody solutions are currently being explored by many financial institutions, where an emerging client base built on the economy of digital assets will have a flexible channel to securely manage their holdings. Head of Vontobel Investment Banking Roger Studer said, “Digital Asset Vault is a logical evolution.”

Choi Kyung-pil, Director of the Center for Future Finance Research at the Korea Institute of Finance has also said that “traditional assets are in danger too, and the custody market is in place”.

With the expected influx of institutional investments, the need for such integrated services becomes ever necessary, with security being the most essential requisite.

Other key figures in the crypto industry such as Coinbase and BitGo have also ventured into the custodial business, aiming at servicing sophisticated investors.

Switzerland continues to shape its blockchain and digital asset industry to become one of the most conducive environments for its development. Its most recent activity includes adapting its existing laws to accommodate blockchain. Moreover, newly-elected president Ueli Maurer, who has been supportive of the development of the industry while being finance minister, has filled crypto adopters in the country with hopes of more positive outcomes.

 

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Major Bank in Russia Announces Partnership with Energy Giant to Propagate Blockchain

The largest majority state-owned bank in Russia, Sberbank, revealed details of a partnership with major state-run power company Rosseti, which includes the promotion of emerging technologies such as blockchain.

Together, the pair plan to collaborate on a number of projects with the joint aims of advancing blockchain in Russia, and developing their own internal expertise. A press release detailing the partnerships reads that they will work on educational projects and research trials with one another.

The strategic partnership is a significant move from Russia as it continues to pursue a leading place in the nascent technological field through its various company arms. In this instance, it seems to be using the collaboration as a means of sharing information and progress.

Part of the agreement states that Sberbank will supply Rosseti with a consultant to increase general efficiency and performance, alongside access to the bank’s ”innovative laboratory developments” and its full ecosystem of products.

Apart from sharing its blockchain data, Sberbank will provide Rosseti with its experience and developments in the field of the internet of things (IoT), business process automation, robotics, VR / AR, big data, and artificial intelligence (AI).

Sberbank was one of two financial institutions behind the launch of Russia’s first cryptocurrency investment fund in July 2018, that came as part of the Russian central bank’s ‘regulatory sandbox’ initiatives. Bitcoin, Bitcoin Cash, Ethereum and Litecoin will form an investment portfolio of digital financial assets for the banks to experiment with.

Bitcoin News reported last week on the disappointment from experts surrounding the current content of Russia’s long-awaited cryptocurrency regulatory bills.

Artem Tolkachev, chairman of the Russian Blockchain community claimed that as it stands now, the bill leaves much room for inefficiencies, in part due to the fact that crowdfunding section and the Russian Civil Code were written by different entities, and the contents conflict with each other.

 

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International Bank Wire Fees 65,000% Costlier Than Bitcoin

International bank wire fees are 65,000% costlier than a Bitcoin transaction, according to MyBankTracker, which averaged the fees of 18 banks in the United States. Domestic wire transfers within the United States are 42,000% costlier than a Bitcoin transaction.

As of this writing on 19 September 2018, Bitcoin’s transaction fee averages to USD 0.10, which is what is used to calculate these percentage figures. Bitcoin transaction fees can be as high as USD 1 for the most rapid confirmation time when there is heavy load but even at 1 satoshi per byte, which translates to USD 0.01, Bitcoin transactions will always be confirmed eventually.

At today’s price and assuming the smallest possible size of input, it only takes USD 0.01 of fees to send as much Bitcoin as you want anywhere in the world, even if it’s USD 10 billion. Further, Bitcoin transactions show up in a receiver’s wallet instantly, although unconfirmed, and most online wallets like Blockchain.com allow instant spending without confirmations.

Compare this to a bank wire, which costs USD 49 on average for sending internationally, and USD 16 for receiving an international transaction, yielding a total average international wire fee of USD 65. For international wires, it can take up to 24 hours for the receiver to get the money, typically several days.

Domestically, it costs USD 29 to send a bank wire and USD 13 to receive a bank wire, yielding a total of USD 29 on average for domestic bank wires. Domestic bank wires are usually much quicker than international bank wires, sometimes only tanking a few minutes, but they still are not instant.

Additionally, bank wires are processed by centralized banks, who have the power to freeze and reverse bank wires. There are entire countries blacklisted from receiving bank wires from the United States, like Iran, North Korea, and Venezuela. Bitcoin is decentralized, so it can be sent anywhere in the world and can never be frozen. Bitcoin is immutable, meaning a payment can never be reversed.

 

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Study: Blockchain Can Save Banks $27 Billion per Year by 2030

Market intelligence firm Juniper Research has published the results of its blockchain study, with the findings showing financial institutions are set to save USD 27 billion annually by 2030 should they utilize the technology.

The cost reduction for cross-border settlement transactions is shown to be reduced by over 11% when deployed on blockchain.

#Blockchain deployments to save #Banks more than $27bn annually by 2030, with cost reductions not just in #Payments processing and reconciliation, but in treasury operations and compliance. #Fintech #Banking

Read more in our press release: https://t.co/pNWXeopbjO pic.twitter.com/pYk2PYsISQ

— Juniper Research (@juniperresearch) August 1, 2018

The Future of Blockchain: Key Vertical Opportunities & Deployment Strategies 2018-2030 study also investigates alternative areas where the technology could create more cost-effective practices, including in treasury operations. The savings applicable for banking departments varies; in areas of compliance, automated money laundering checks via blockchain could create a 50% price decrease in just a few years.

Internal banking legacy systems that will most likely be required to run alongside any blockchain tech services may, however, cause the savings process to take several years to be fully implemented. Estimated service cost savings are not expected to reach USD 1 million per annum until 2024.

The full research paper can be purchased from Juniper online.

5 industries benefiting from blockchain

Besides the banking industry, the report notes the benefits of utilizing blockchain technology in a number of other sectors, including food exports and trades, as has been seen in a number of cases already including in the Australian sugarcane industry. The report estimates a nearly 50% cut in the food industry’s costs associated with fraud.

Juniper Research has also released a free white paper detailing five industries that will benefit from blockchain, including land registry, healthcare, and the automotive sector, entitled ‘5 Industries That Will Fuel the Blockchain Boom’.

It splits the research into eight key regions, including the key challenges each industry will face on the way to adoption and the top movers and shakers of the blockchain sector in 2018.

 

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South Korean Banks Initiate Blockchain-Based ID System

The Korean Federation of Banks (KFB), a group of South Korean commercial banks, has announced that a new blockchain-based ID initiative dubbed ‘BankSign’ will be implemented in July later this year.

The initiative will replace the massively outdated current system that has been in place for 20 years that has resulted in an enormous number of fraudulent activities, described by local news outlet Korea Joongang Daily as “notorious for its complexity and inconvenience“.

Blockchain solution

Park Chang-ok, a manager at the department of deposit services and payment systems at KFB described BankSign as giving financial institutions the option to ”choose from in verifying consumer identity, not just the public certification system“.

A spokesperson for KFB explained, ”[It is] the first project co-developed by the local banking sector utilizing blockchain technology. While BankSign will start off by providing the service in the banking sector, we will work with the government and other public organizations to expand its usage.”

The project has been built on the Nexledger blockchain, created by Samsung specifically for businesses. Development began in November 2017, with beta testing following in April 2018.

The current system

The system at present requires a number of identity checks to take place before goods and services can be purchased online in South Korea, with users required to download several security programmes that are only usable on the device they are directly downloaded onto.

While the active software was modern in 1996, there are several reported challenges it now faces. The programmes may slow down computer systems, only working on Internet Explorer for desktop users.

In addition, the outdated technology has led to an estimated 80% of users information compromised in 2014. Research Gate conducted a study the same year that estimated national losses due to these hacks between USD 10 billion and USD 40 billion.

 

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Circle Attempting US Banking License

Cryptocurrency exchange Circle is seeking a banking license from the federal government of the United States. If successful, this would be the first cryptocurrency exchange that becomes an official bank in the United States, which would be a major milestone for the cryptocurrency world.

Becoming a bank would give Circle some important benefits, such as being able to access the central banking system without intermediaries which would allow Circle to settle with other banks in different markets around the world. Also, Circle would be able to store money in the Federal Reserve, as well as take loans at the extremely low inter-bank federal funds rate of 1.75%, freeing Circle from dealing with higher-cost lenders. These benefits would improve the efficiency and reduce the cost of Circle’s services.

Becoming an official bank would also simplify Circle’s regulation process. Cryptocurrency exchanges are regulated differently in each state, but if Circle would become an official federally-recognized bank, it would only have to answer to the federal government. As Circle’s chief compliance officer Robert Bench says, instead of “50 conversations”, Circle would only have to be involved in one conversation.

Additionally, Circle is trying to register itself as a brokerage and trading venue with the Securities and Exchange Commission (SEC). This would give Circle the proper licensing to facilitate trading of digital assets considered to be securities. This is crucial since Circle acquired Poloniex for USD 400 million in February 2018, where there are dozens of cryptocurrencies being traded, some of which could be considered securities. Already, many cryptocurrencies have been delisted from Poloniex following Circle’s acquisition to avoid SEC backlash.

Circle has an OTC trading service that transacts USD 2 billion of cryptocurrency every month, as well as an investing platform where users can put money into various cryptocurrencies but not withdraw the cryptocurrency. Circle also has a pay service where users can send money instantly to people in 29 countries with USD, GBP, and EUR. Deposits held with this service are FDIC ensured up to USD 250,000, like all banks in the United States.

It is only natural that a service like Circle which deals with so many financial transactions and deposits would consider becoming a bank. Only time will tell if the US government will let a firm so heavily involved with cryptocurrency to achieve this.

 

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Binance Acquires Maltese Bank Account, Plans Fiat Functionality Within a Year

Cryptocurrency exchange Binance has announced that it has successfully opened a bank account in Malta. The CEO of Binance, Zhao Chengpeng, says that fiat to cryptocurrency trading will be launched within a year on the exchange.

Binance is the top cryptocurrency exchange in the world by volume with USD 1.5 billion of trading in the last day. This edges out the second biggest exchange OKEx by USD 100 million  and third biggest exchange Huobi by USD 350 million. Of course, these numbers vary from day to day, but Binance has almost always the top cryptocurrency exchange in the world by volume recently, with 343 different cryptocurrencies traded.

Despite being the biggest cryptocurrency exchange in the world, Binance has had no fiat functionality up to this point. Soon customers will be able to deposit fiat and buy cryptocurrency, and deposit cryptocurrency and withdraw fiat. This will attract many more customers and a lot more money to the exchange, improving liquidity and increasing market activity, cementing Binance’s top spot among cryptocurrency exchanges.

Binance was founded in Hong Kong, China, but was forced to move in September 2017 due to China banning all cryptocurrency trading. Binance chose Japan for its next headquarters but its stay was brief. On 23 March 2018 Japan’s Financial Services Authority issued a warning to Binance that it must cease operations since it didn’t have a license; Binance was trying to get a license before they moved but were unsuccessful.

Immediately after the Japanese warning, Binance decided to move to Malta, which is becoming a popular haven for cryptocurrency activity. The Prime Minister of Malta, Joseph Muscat, welcomed Binance with open arms.

Welcome to #Malta 🇲🇹@binance. We aim to be the global trailblazers in the regulation of blockchain-based businesses and the jurisdiction of quality and choice for world class fintech companies -JM @SilvioSchembri https://t.co/3qtAQjOpuQ

— Joseph Muscat (@JosephMuscat_JM) March 23, 2018

Zhao Chengpeng says Malta is one of the best places for blockchain firms and praises the local government’s attitude. He says things are going very well, and Binance may possibly form a partnership with Malta’s Stock Exchange.

Despite the peace of mind that Malta offers, Binance is still trying to become completely decentralized and considers that a top priority. This is not surprising considering that Binance has been chased around the world by angry governments. Becoming completely digital and decentralized is the only way to guarantee its long-term survival.

 

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Argentinian Bank Utilizes Bitcoin for International Payments

Banco Masventas, a bank based in Argentina, has launched a new service as of 22 May 2018 which will utilize Bitcoin to facilitate international money transfers. This is a major milestone for Bitcoin, since it is likely the first time it has been used by a financial institution as an international payments standard.

The bank is partnering with Bitex, a Latin America-based Bitcoin exchange, to facilitate the international payments. In an interview with Coindesk, Bitex chief marketing officer Manuel Beaudroit said that customers won’t actually be touching any Bitcoin when using this new international payment service offered by Banco Masventas. The customer simply asks the bank to send an international payment from their account, and the bank in coordination with Bitex will handle converting their fiat funds to Bitcoin and back again when it reaches its international destination.

This service offered through Bitex will allow Banco Masventas customers to significantly reduce costs associated with international transfers since there will be no international banks as intermediaries. Also, international transfers will be faster than other systems, occurring in less than 24 hours. It only takes 10 minutes for a Bitcoin transaction to confirm on average, but it will take some time to convert fiat to Bitcoin and back to fiat.

International transfers will be available to over 50 countries, and Banco Masventas will be charging a 3% commission.

Of course, Bitex’s process of converting fiat to Bitcoin and back to fiat when the money reaches its international destination is inherently centralized and possibly not entirely cryptographically secure. Customers will have to trust Banco Masventas and Bitex when using this new international transfer service.

Sending Bitcoin by itself with no other service involved actually makes more sense if control of your money and security is the priority. Of course, using purely Bitcoin is less convenient since ultimately it usually needs to be converted into fiat before it can be used to buy goods and services. Bitex streamlines the process of converting Bitcoin payments to fiat, which can be quite an arduous process if someone had to do it themselves. Also, using the service offered through Bitex removes the risk of market volatility.

It is a big deal that any bank is using Bitcoin to transfer money across international borders, and this may be the beginning of banks recognizing and utilizing Bitcoin as a trustworthy payment method in the future. Bitcoin’s ability to transfer money anywhere in the world instantly and securely is gaining recognition.

 

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