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New York Financial Regulators Approve Blockchain Payments System

New York state financial regulators have authorized a blockchain-based payments system offered by a local commercial bank.

The Department of Financial Services of New York (NYDFS) has authorized a blockchain-based digital platform offered by a local bank, an official NYDFS press release states Dec. 4.

NYDFS superintendent Maria T. Vullo announced today that the department authorized New York-based Signature Bank to offer its digital payment platform Signet in the state. The approved system reportedly uses blockchain technology to allow the bank  clients to “transfer ‘Signets’ to make payments with no transaction fees, at any time of the day, year-round.”

The system purportedly allows funds “to be transferred in real-time between two commercial clients of Signature Bank, eliminating any dependence on a third party.” Signet has been subject to a “comprehensive and rigorous review” and needs to comply with “significant regulatory conditions.”

Namely, the “approval includes required conditions to ensure […] compliance with New York’s strong standards and regulations regarding anti-money laundering (AML), anti-fraud, and consumer protection measures.”

Moreover, Signet balances are eligible for coverage by the Federal Deposit Insurance Corporation (FDIC), of which Signature Bank is a member. This corporation underwrites most private U.S. bank deposits “up to the legal insurable amounts defined.”

Vullo declared that the department is “pleased to strengthen and foster regulated innovation […] specifically within our state-chartered banking system.” The superintendent stated:

“New York continues to support and help advance innovation through sound state regulation and with products such as Signet…”

According to the press release, Signature bank is a “full-service commercial bank with 30 private client offices throughout the New York metropolitan area,” which currently has $45.87 billion in assets.

This is just the latest development in the growing New York blockchain industry. In November, crypto hardware wallet Ledger opened a New York office to develop its institutional custody offering Ledger Vault.

Coinbase, the highest-volume U.S.-based cryptocurrency exchange, also obtained approval to offer crypto custody services in the state in mid-October.

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Russia: Sberbank and Interros Group Conclude Blockchain-Based Foreign Exchange Repo Deal

Interros Group and Sberbank in partnership have carried out an OTC foreign exchange repo deal on blockchain.

Sberbank and Interros Group have carried out an over-the-counter OTC foreign exchange repurchase agreement (repo) transaction employing smart contracts on a blockchain, Reuters Russia reports Nov. 30.

The Interros Group is a Moscow-based private equity firm founded by Russian oligarch Vladimir Potanin in 1990, with stakes in Norilsk Nickel, pharmaceutical company Petrovax Pharm, and ski resort development firm Rosa Khutor.

Head of global markets department and vice president at Sberbank, Andrei Shemetov, informed Reuters that the transaction is real, legally binding, and has been “concluded in electronic format using a smart contract and digital signatures through the IT platform of Sberbank.”

The aforementioned article also mentions that while Shemetov “did not disclose the scope of the transaction,” he “indicated that the amount corresponded to the average volume of the interdealer repo transaction.”

Shemetov further explained that “the transaction is a currency repo secured by the pledge of Eurobonds of the Russian issuer of the first tier.” He also described how blockchain will improve the services offered by Sberbank:

“In the long term, the conclusion of transactions through the blockchain platform will reduce transaction costs and errors through automation, as well as increase transparency and trust among all participants in the financial market.”

Reuters reports that Shemetov cited “the creation of a software environment with the ability to audit data on a bilateral basis” and “automation of settlement and operational functions” as advantages of blockchain-based repo transactions.

The article further declares that the smart contracts used — which will be part of the “overall decentralized infrastructure of the financial market” — have been written in the Go programming language and have been deployed on the Hyperledger Fabric Platform. The system permits real-time monitoring of “covenants and other market conditions.”

As Cointelegraph recently reported, Sberbank CEO Herman Gref has predicted that blockchain will be used on an industrial scale in one to two years, after having said this October that blockchain technology will be “ready” in three to five years.

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Goldman Sachs Said to Have Sidelined Plans for Crypto Trading Desk

Investment bank Goldman Sachs has reportedly dropped plans to launch a cryptocurrency trading desk, for now at least.

A Business Insider report on Wednesday, citing “people familiar with the matter,” said the decision has been made as the regulatory situation in the U.S. is still a gray area when it comes to cryptocurrencies.

However, per the sources, the banking giant hasn’t abandoned the idea completely, but is rather pushing the possibility lower down on its priorities list and could still move to open the desk at a later date.

Further, Goldman Sachs’ plan to start offering a cryptocurrency custody service is apparently still on the table, with Business Insider citing the need for “reputable custody offerings” to bolster confidence around involvement in cryptocurrency at Wall Street firms.

As reported by CoinDesk, the bank was first revealed to have an interest in a crypto trading venture back in October 2017, though it was said to be in the very early stages of exploring the idea.

In May, however, it was also suggested, once more via anonymous sources, that it would use its own money to trade bitcoin futures products from CBEO and CME on behalf of its clients. Goldman was also preparing to launch “its own, more flexible version of a future, known as a non-deliverable forward, which it will offer to clients,” according to the New York Times at the time.

The latest piece of Goldman’s crypto jigsaw came into place in early August, when it followed up the futures plan with the possibility of a crypto custody service aimed to protect institutions’ holdings from hacking and accidental loss.

So far, though, little has been said publicly by the bank on these potential moves into the crypto space.

In fact, the bank has previously been somewhat skeptical about cryptos, warning investors in January that they were “in a bubble.”

Red traffc light image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Ripio Rolls Out Crypto-Powered Loans Across Latin America

Here’s something you don’t see every day: an ICO that has actually led to a shipped, working financial product.

Revealed exclusively to CoinDesk, Argentinian startup Ripio is making peer-to-peer microloans available today to all its 200,000 bitcoin wallet users in Argentina, Mexico, and Brazil. The Buenos Aires-based company raised $37 million in an initial coin offering (ICO) last year to build the Ripio Credit Network, which matches individual lenders and borrowers across the globe through ethereum smart contracts.

Today’s full rollout of that marketplace follows a closed beta in which more than 800 loans were facilitated to customers in Argentina. Ripio said it now has 3,000 lenders on the network, many of them located in Asia, issuing loans for up to $730, though so far the average loan size is $146.

Ripio CEO Sebastian Serrano told CoinDesk:

We have people from Asia funding people in South America, which is something you cannot do with another [app].”

Previously known as Bitpagos, Ripio is one of the longest-running startups in the crypto space, with well-established merchant processing, exchange and wallet services. It entered the credit business in 2016, lending its own funds to consumers in Argentina, before pursuing this more ambitious vision for global p2p lending.

While the borrowers receive their loans in fiat, the new network is powered by an ethereum-based token called RCN. Lenders send the funds in RCN, a cut of the tokens goes to third parties involved in the lending process – such as identity verifiers, credit scorers and co-signers of the loans – and Ripio (and, potentially, other wallet providers) converts the RCN to fiat before disbursing the money to the borrower.

Unlike most exchanges and mobile lending services, Ripio’s offerings are available to unbanked crypto users. This is essential for Latin American markets where people have diverse but overwhelmingly complicated histories with the banking industry. For example, according to World Bank statistics from 2017, around 30 percent of adults in Brazil are unbanked, compared to 54 percent in Colombia.

Although the startup doesn’t have data on how many unbanked users are on its platform, a survey of 1,000 Ripio users revealed 19 percent didn’t have a credit card. They often fund their wallets by depositing cash at convenience stores that partner with Ripio.

With the credit network, however, they now have a way to build a track record of repaying debts, which could help them obtain financial services in the future. Further, “the entire lifecycle of the credit and the loan” is contained in the smart contract on the blockchain, Serrano said.

“It gives the user credit history. Even if the marketplace disappears the code will continue to execute,” he said.

To make credit histories recorded in smart contracts widely useful, Ripio has proposed a standardized way to present claims about an identity (e.g. “Joe made all his car loan payments on time”) on ethereum. Serrano explained:

“In order for it to work across products and networks, ethereum needs to get a standard for identity claims so that every project uses one or two claim standards, kind of like we have ERC-20 [for tokens].”

Cross-border markets

Over the next year, Ripio plans to expand services to Chile, Colombia, and Uruguay.

“Every market has these different characteristics, regulations, things you have to comply with,” Serrano told CoinDesk, “Things you have to do to make it easy for users to deposit cash.”

Political instability can create roadblocks, however. For example, Ripio once operated in Venezuela and still maintains staff there, but security concerns and opaque regulations forced the startup to halt operations.

“We hope to extend service there as soon as this madness ends,” Serrano said. “It’s become very, very difficult to maintain operations in Venezuela, legally.”

In order to expand, Ripio is looking for more fiat-centric partnerships like the ones it established in Brazil with Neon Bank and Banrisul. Since users are handing over cash, Ripio needs banks for storage. Plus, expanding such partnerships in each nation could provide crucial liquidity.

Santiago Siri, the Argentinian founder of a blockchain governance project called Democracy Earth, told CoinDesk that Ripio’s partnerships are already making an impact across the continent.

For example, through its partnership with the e-commerce giant Mercado Libre, shoppers and sellers can transfer funds between their e-commerce accounts and Ripio wallets, offering new avenues for people to earn or spend crypto.

“Large populations in countries like Brazil and Mexico are unbanked,” Siri said. “So companies like Mercado Libre have to find ways to do business without credit cards. Ripio has been leading this, allowing people to do payments [indirectly] with bitcoin.”

Serrano said 15 percent of Ripio wallets’ transaction volume, millions of dollars per month, now comes from Mercado Libre. Rosine Kadamani, the founder of the educational Blockchain Academy in Brazil, praised this partnership with the largest e-commerce platform in the region, as well as Ripio’s crypto-powered loans, saying:

“When we’re trying to get people in the crypto space, it’s a good strategy to reach people where they are already comfortable… Why not provide a space for peer-to-peer loans? I see no reason at all for credit to be monopolized by banks.”

Speaking to the demand for such cross-border conduits, Siri added: “Latin America is a very fertile region for the deployment of cryptocurrency infrastructures.”

Sebastian Serrano image courtesy of Ripio

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.