New BitLicense Approval, Stablecoin Developments and BAT on Coinbase
By: Panida A. Pollawit
The New York Department of Financial Services (DFS) has granted New York Digital Investment Group (NYDIG) Execution LLC the 14th BitLicense in the state. A BitLicense permits businesses to perform custodial services and transmit cryptocurrencies. In the press release announcing the BitLicense approval, CEO Robert Gutmann of NYDIG, thanked DFS “for providing a clear and comprehensive regulatory framework for investors, providers, and users alike.” In more U.S. news, as of last Friday Coinbase customers – except those in New York – will be able to buy Basic Attention Token (BAT) on Coinbase. BAT is an Ethereum-based token that is intended to be used as a utility token on the Brave browser, which is seeking to change the relationship between advertisers, publishers and users in the digital advertising world.
Stablecoins – cryptocurrencies that are designed to remain at the same price – continued to make news this week. Binance, the second-largest crypto exchange in the world by 24-hour trade volume, recently announced that it was listing Circle’s USD-pegged stablecoin, USD Coin (USDC), starting on Nov. 15, 2018. Carbon announced last Friday that its USD-pegged stablecoin, which has been on Ethereum for two months, is the first to operate on the EOS platform. In South Korea, the popular messaging app KakaoTalk has partnered with Terra, a stablecoin project funded by four major crypto exchanges, to create a blockchain-based payment system using Kakao’s blockchain platform Klaytn.
In Australia, the National Disability Insurance Scheme (NDIS), Australia’s equivalent of the U.S.’s Supplemental Security Income for people with disabilities, is testing a blockchain-based programmable money that “knows what it can be spent on, who it can be spent by, and when it can be spent.” NDIS intends to use this “smart money” to manage insurance payouts, among other activities. In Japan, Mitsubishi UFJ Financial Group Inc. (MUFJ) announced that it will partner with Brazil’s Banco Bradesco to create a new cross-border payment system between Brazil and Japan using Ripple (XRP). And Malaysian banking group CIMB announced that it has joined RippleNet, Ripple’s blockchain-based payment network, to make faster, less costly cross-border payments within the Association of Southeast Nations (ASEAN).
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Blockchain Platform for Energy Commodities Announced in U.S., Restrictions Ease in Foreign Markets
By: Marc D. Powers
Major oil companies in the North Sea and other industry participants recently announced the formation of a blockchain-based energy commodity trading platform called VAKT. They expect the platform to be operational by the end of this year and ultimately to bring about a 40 percent cost savings for trading and settlement, utilizing smart contracts.
A major U.S. financial services company issued an updated report on its review of bitcoin and cryptocurrencies, which was more optimistic than its past report. The firm is reportedly planning to offer bitcoin swap trading and has described cryptocurrencies as a “new institutional investment class.” Another bank announced it had beta-tested a digital safety deposit box, which seeks to provide cryptocurrency storage and multi-signature services for cryptocurrency exchanges and investment funds. A third bank recently was awarded a U.S. patent for a cryptocurrency storage facility targeted at enabling enterprise-level institutions to store cryptocurrencies on behalf of their customers, including private key storage.
On the international front, France recently introduced an amendment that would lower the capital gains tax on bitcoin transactions from 36.2 percent to 30 percent. In Thailand, the Thai Securities and Exchange Commission (SEC) this month is reported to be close to approving the first SEC-certified initial coin offering (ICO) portal, which will offer ICO due diligence services, including reviewing smart contracts code and know-your-customer procedures. According to reports, the first ICO authorized by the Thai SEC may follow as early as December. In China, a recent decision from the Shenzhen Court of International Arbitration is being interpreted as allowing citizens to legally own cryptocurrencies and use them in commerce, which appears to reverse a government ban on bitcoin and cryptocurrency trading. In Singapore, an institutional stock exchange and the Monetary Authority of Singapore are reported to have successfully trialed a blockchain tokenized asset settlement system that seeks to promote efficiency and reduce settlement risk. Finally, a recently released report on cryptocurrencies and ICOs found that despite the price declines in 2018 and the continual decline in monies raised by ICOs in recent months, investors are still net positive on cryptocurrencies as investments despite.
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CFTC and State Securities Enforcement, Litigation Developments and Fraud Schemes
By: Simone O. Otenaike
Late last week, the Commodity Futures Trading Commission (CFTC) ordered an individual to pay more than $1.1 million in restitution to his former employer, a Chicago-based proprietary trading firm, and its individual customers. The CFTC order found that between September and November 2017, the individual orchestrated a fraudulent Bitcoin and Litecoin scheme and misappropriated more than $600,000 from his former employer. After the trading firm terminated the individual for the misappropriation of funds, the man continued to fraudulently solicit funds from the firm’s customers, obtaining approximately $545,000 from at least five customers to trade virtual currency. The U.S. Attorney for the Northern District of Illinois also filed criminal charges against the man, who pleaded guilty to wire fraud and fraudulent solicitation of funds from investors and was sentenced to 15 months. Also last week, the Colorado Securities Commissioner issued orders to stop 12 unregistered initial coin offerings that are accessible to Colorado residents.
According to court documents published Wednesday, Ripple Labs filed to move the consolidated class action by XRP investors from state court to federal court, arguing federal court is the proper venue based on the U.S. Class Action Fairness Act. The plaintiffs are seeking $167.7 million from Ripple Labs in damages. In other litigation news, China-based Bitmain filed a lawsuit against an anonymous hacker for the alleged theft of $5.5 million worth of Bitcoin and other digital assets. Although Bitmain is a China-based company, the lawsuit was filed in the U.S. District Court for the Western District of Washington.
In Japan, Tokyo police arrested eight men suspected of raising $68.4 million in cash and cryptocurrency. The suspects reportedly raised the cash and cryptocurrency funds through a U.S.-based pyramid scheme. The victims of the scheme recently filed a lawsuit in Tokyo District Court and are seeking approximately $3.2 million in damages. Last Thursday, in Nova Scotia, St. Francis Xavier University was forced to shut down its entire network after discovering that an unknown party was using the network to mine cryptocurrency. According to reports, the university is still working diligently to restore the network and find the individual(s) responsible for the attack.
To read more about the topics covered in this week’s post, see the following:
More Blockchain Uses for Digital Advertisers, Software Licensees and Marine Insurers
By: John C. McIlwee
Adledger, a consortium of ad companies in the digital media space, recently issued a free Blockchain and Advertising Special Report. The report identifies several major challenges confronting ad agencies in digital media, educates readers on blockchain technology and proposes use cases for early adopters. According to the report, consortium members see big brands moving millions of ad dollars away from digital media because of widespread fraud. Bots spoof legitimate websites to proliferate inauthentic ad clicks across the entire industry. These bots sap ad purchase value by increasing costs without ever getting the ad in front of the intended consumer. Adledger predicts that blockchain technology will trace the IP addresses of legitimate users, frustrate bot developers and restore advertiser confidence in the digital media space.
The Adledger report touts the recent work of two consortium members that use blockchain technology to enhance programmatic ad buys for digitally delivered television. Using this application, advertisers and networks get immediate feedback on where ads run, whether the viewer watches the entire ad and, if the ad is interactive, whether the viewer engages – all while stripping personally identifiable information to ensure data privacy. Meanwhile, outside the ad consortium, a U.S.- based software firm, Blockchain4Media, recently collaborated with R3 on a pilot to combat false ad engagement. Blockchain4Media believes that its combination of artificial intelligence, machine learning and blockchain controls will provide advertisers greater access to authentic consumer engagement.
Also this week, a major global consulting firm announced a new blockchain-based product for large organizations to track and manage their software license portfolio. The program relies on blockchain technology to increase the visibility of software license data while reducing the risks associated with unlicensed software use and failure to comply with use terms. The consultancy believes that its new application will provide a clearer view of software license distribution and utilization, potentially saving millions in operational costs.
Earlier in the month, another proof of concept for blockchain technology in the marine cargo insurance industry was announced. A partnership between a Japanese insurance company and a global data analytics firm verified that claim settlement drastically improved when using blockchain technology to promptly distribute, share and utilize marine insurance claim data across eight sites in Europe, the Americas and Asia.
To read more about this week’s articles on enterprise blockchain use cases, see the following:
