Posted on

Pet Stablecoins: Why Some Banks Issue Their Own Digital Tokens, While Others Don’t

A number of banks revealed plans to issue their own tokens, following JPMorgan Chase’s move.

This week, a number of banks shed light on their respective crypto-related projects, following the recent expansion of JPMorgan Chase into the field.

IBM was the big mover. A joint announcement by IBM and Stellar (XMR) said that as many as six global banks might issue their own stablecoins on IBM’s blockchain-powered payments network, dubbed “Blockchain World Wire” (BWW).

The question now is whether this marks a turning point for cryptocurrency’s use, or if it merely continues the experiments that have marked the early stages of digital money. While quite a few financial institutions seem ready to go blockchain and create tokens in a bid to streamline cross-border payments, some still choose to set the technology aside.

Citigroup, the corporation behind one of the world’s top-20 banks by asset value, revealed earlier this week that it was abandoning its “Citicoin” project to focus on more conventional remittance methods like SWIFT. The bank’s reasoning seemed focused on preserving the current forms of inter-bank transfers as a proven and universal method.

Can those bank-issued coins be called “cryptocurrencies”?

When JPMorgan Chase announced that it built its own digital token based on a private Ethereum (ETH) blockchain last month, the crypto community seemed largely skeptical.

Nathaniel Popper, author of the book “Digital Gold, a History of Bitcoin,” tweeted back then:

“The JPM Coin makes it possible to move dollars between JPMorgan bank accounts instantly. That raises the question: Why was it not already possible to move dollars between two JPMorgan bank accounts instantly?”

Given that the JPM Coin is only available for private use within the inner circle of the banks’ clients, one should be hesitant to even call it a cryptocurrency, according to at least one expert.

Hartej Sawhney, a blockchain expert and co-founder of Hosho, a startup protecting investments and providing multiple smart contract services, told Cointelegraph in an email:

“Recently, banks and media have had a field day misusing the word cryptocurrency. There is no such thing as a ‘cryptocurrency’ without open consensus or permissionless participation. Announcing a new ‘coin’ was simply a marketing play for J.P. Morgan. Bitcoin for example, is open source, permissionless, strictly limited in quantity, and has no account fees.”

Not only is the JPM Coin permissioned and available only to institutional customers who have been cleared via JPMorgan Chase’s Know Your Customer (KYC) precautions, Sawhney added, it is also pegged 1:1 to fiat currencies held by the bank. That is fundamentally different from what cryptocurrencies constitute, he argued:

“Anyone can use a cryptocurrency, and anyone can participate in its consensus system without seeking permission from anyone else.”

Regulated institutions will act

Michael Dowling, CEO and founder of FairX, a financial services company involved with banking and digital assets, and former chief technology officer at IBM’s blockchain arm, also distinguishes bank-issued coins from conventional, “pure-play” cryptocurrencies akin to Bitcoin (BTC), XRP and XMR. Bank-backed tokens are “cryptocurrency implementations of fiat currency,” which are commonly referred to as “stablecoins.” He told Cointelegraph:

“A lot of people are obsessed with this ‘token’ thing, but at the end of the day a bank is a really fancy ledgering company with amazing security; the key to bank’s successful use of blockchain tech, in a practical way, is to shift some of the authentication of a user from the centralized bank to the user’s own device, proven by a cryptographic ledger. That’s really what this bank-issued coin is really all about — it’s still the same USD ledger, its authentication for who is allowed to change the ledger has shifted from username/password at the bank to pub-pri key cryptography in a distributed fashion.”

Downey then summarized his statement: “I do NOT believe regulated institutions will announce their own pure-play cryptocurrencies, but I am absolutely certain they will announce their own deposits on ledger.”

Interestingly, while JPMorgan Chase’s move was largely reported as a first for a United States bank (and any major lender), New York-based Signature Bank rolled out a similar feature earlier in December 2018. Dubbed the Signet Platform, the private blockchain allows the banks’ clients to move their money “in 30 seconds,” just like the JPM Coin — and it is also pegged to the U.S. dollar. It comes as no surprise that Signature’s coin was largely overlooked, given how the bank compares to JPMorgan Chase size-wise: The former has just $45 billion in assets, while the latter wields more than $2 trillion.

When announcing the feature, Signature Bank co-founder and CEO Joseph J. DePaolo seemed particularly bullish on the use of private blockchains for financial institutions. He told Forbes:

“We have to do this, otherwise we’re not going to exist. […] If you’re not involved in blockchain, in five years, you won’t be around as a bank.”

DePaolo’s viewpoint seems to echo the findings of Citigroup’s “Bank of the Future” report, which suggests that fintech companies that are actively disrupting the banking market with new technologies are driving out its longstanding participants — or at least compelling them to give up a large portion of their margins, a traditionally important source of income for banks. Specifically, the paper estimates that by 2025, major North American banks could lose 34 percent of profit from mainstream areas such as payments, investments and personal lending.

What is a bank-issued coin’s purpose?

Primarily, banks tend to pick up blockchain for instantaneous cross-border payments. The technology shows a lot of potential within that field. Blockchain reportedly allows performing international remittance “in near real-time,” according to the IBM website, while normally they take three to five working days to complete within the existing infrastructure. Moreover, transaction costs can be saved as third-party intermediaries get removed from the process (according to research from McKinsey, the average cost for a bank to execute a cross-border payment through correspondent banking costs $25 to $35).

The two largest blockchain projects aiming to streamline cross-border remittance for global banks are hosted by Ripple and IBM Blockchain. Ripple has at least two blockchain-powered payment tools for those purposes, called xRapid and xCurrent (the main difference between them is that xRapid uses XRP, the company’s native token, while the latter works with fiat currencies). IBM, in turn, oversees its Blockchain World Wire (BWW) payment network operating on the Stellar (XMR) blockchain, which completed its beta in September 2018.

At this point, both Ripple and IBM Blockchain seem to be a force to be reckoned with: RippleNet reportedly has more than 200 clients, while BWW, which has been around for considerably less time, is currently used by 54 banks, as Jesse Lund, global vice president of IBM Blockchain, told Cointelegraph. Both of them are networks that are open to a wider amount of financial institutions, while some banks — like the aforementioned JPMorgan Chase — want to deploy their own private ledgers.

Notably, unlike Ripple, IBM’s BWW supports different digital assets within its blockchain, including bank-issued coins: Just recently, Cheddar reported that six international banks — such as Brazil’s Banco Bradesco, South Korea’s Bank Busan and the Philippines’ Rizal Commercial Banking Corporation — have signed letters of intent to issue their own stablecoins backed by their national fiat currencies on IBM’s network. “These are expected to add Euro, Indonesian Rupiah, Philippine Peso, Korean Won and Brazilian Real stable coins to the network,” Lund told Cointelegraph in an email, adding:

“Ultimately, we hope to see a global financial network that represents a real-time facility for moving money from anywhere to anywhere — where foreign exchange is just an inherent part of the process that happens automatically through the use of an expanding digital asset ecosystem.

“World Wire can use fiat currency, lumens or stable coins. This is a completely new kind of payments infrastructure than traditionally used, and it differs from SWIFT and other approaches.”

Downey also highlighted this feature as a major advantage for the network:

“While IBM’s service does use a pure-play crypto as a settlement asset as an option, I believe the legitimate institutions will use fiat-stablecoins issued by banks as settlement assets instead. That stabs Ripple in the heart — why use XRP if I can use….an acknowledged and accepted currency?”

Cointelegraph has reached out to Ripple to get a further comment for this article, but they failed to prepare a statement before press time.

Ripple’s CEO, Brad Garlinghouse, has criticized the concept of bank-issued digital coins (which he calls “bank coins”) and specifically the JPM Coin in the past, citing its centralized structure, among other things. He has also argued that the JPM Coin lacks the interoperability that would make it a significant innovation:

“This guy from Morgan Stanley was interviewing me last week, and I asked him, so is Morgan Stanley going to use the JPM Coin? Probably not. Will Citi use it? […] Will PNC? And the answer is no. So we’re going to have all these different coins, and we’re back to where we are: there’s a lack of interoperability.”

Downey agrees with that statement. “It [the JPM Coin] MUST be interoperable between banking institutions for it to work properly,” he told Cointelegraph. “Otherwise, we’re just swapping bank currencies.”

Bank-issued stablecoins vs. public stablecoins

Stablecoins — with their ability to overcome crypto’s infamous volatility — have become widespread during the bear market, especially among more compliance-oriented players.

Projects like USD Coin (USDC), launched by payments company Circle in conjunction with Coinbase, the Winklevoss twins-backed Gemini dollar, Paxos and Facebook’s secretive project are among the most notable examples.

Recently, Jeremy Allaire, co-founder and CEO of Circle, has argued that, as the sector continues to see new market participants, stablecoins using an open-standards approach will prevail, while also welcoming Facebook’s still-to-be-confirmed plans:

“That’s [Facebook’s reported plans are] very, very positive in our view overall. The approach that we’ve taken is to create a consortium model. When we think about a standard for how fiat money works on the internet, it’s really critical that it’s an open standard that many companies can implement, that has an self-governance mechanism around it that can evolve both a technical standard as well as a membership framework.”

Essentially, Allair argued that creating “an HTTP for money on the internet” that could support global participation from multiple actors is “ultimately going to be much more successful than a single company issuing a cryptocurrency themselves.”  

However, Downey told Cointelegraph that stablecoins that are not issued by banking institutions might have a significant disadvantage over the public ones run by startups:

“Only banks can ‘take deposits,’ which have a specific meaning with specific legal protections around the assets held on deposit in case of bankruptcy.  Some, such as Gemini, have set up ‘trusts’ to park the cash, but it requires costly monthly attestations that come, frankly, for free as a bank. In addition, the Gemenis, the Circles, etc. all seem to be releasing their coins for the purpose of de-risking within their platforms. Very short term thinking, and no one is going to do real business (with real volumes with real value) using that setup. That’s what banks are for.”

Notably, Ron Karpovich, global head of e-commerce solutions at JPMorgan Chase, has recently raised a similar point in an interview with CNBC’s Squawk Box.

In response to a question as to how the top U.S. bank is ready to compete with new actors that can employ blockchain and cryptocurrencies to offer the same services as the industry’s veterans, but with cheaper fees, Karpovich said:

“Ultimately behind the scenes, they [crypto innovators] are going to have to use a bank to move funds. There’s more partnership instead of competition in that space. […] When it comes to margins and capabilities — payments is never something that grows in margin, nobody wants to pay for a payment. That’s one of the hardest parts of this process: you have limited resources in the capability to sell, so you need highly efficient and large players.”

“Citicoin”: The four-year project cut short in favor of more traditional remittance methods

Citigroup, unlike other mainstream institutions that couldn’t resist mentioning the word “blockchain” in their press releases at the time when it was popular to do so, has kept its cryptocurrency operation underground. It first surfaced back in July 2015, when International Business Times interviewed Ken Moore, head of Citi Innovation Labs. Moore told the publication that they were studying distributed ledger technology (DLT) for “the last few years.” Moreover, he added, the lab had constructed three separate blockchains and a cryptocurrency for test purposes:

“They [the three blockchains] are all within the labs just now so there is no real money passing through these systems yet, they are at a pre-production level to be clear. […] We also have an equivalent to bitcoin up and running, again within the labs, so we can mine what we call a ‘Citicoin’, for want of a better term. It’s in the labs, but it’s to make sure we are at the leading edge of this technology and that we can exploit the opportunities within it.”

Moore also specified that “most of our efforts have been focused on payments; trade probably being a second runner.”

Now, when JPMorgan Chase has just rolled out its own cryptocurrency to speed up its in-house transactions, Citigroup announced it was putting its crypto project on hold. Specifically, Gulru Atak, global head of innovation for treasury and trade solutions, said in one report that they were reviewing methods for cross-border payments, but with a shorter-term effect. Citigroup is not abandoning blockchain, she said. But, for now, it is looked at as merely an adjunct to SWIFT.

Indeed, SWIFT is a 46-year-old interbank messaging service and a co-operative owned by about 11,000 member banks in more than 200 countries. Its network handles as much as $5 trillion worth of transactions per day worldwide, as per U.S. Department of Treasury data, which allegedly includes more than half of all high-value, cross-border payments, making SWIFT a top player when it comes to sending money from country A to country B.

“Citi’s experience was just like JPM’s, with one big difference,” Downey told Cointelegraph:

“Both were prototypes, and both focused on internal transfers. JPM has been investing in blockchain tech for years now, and I think they needed to start justifying those investments, and that’s why they announced — with much fanfare — a prototype that works….only within JPM.  Citi’s approach is to focus on faster payments through SWIFT. I don’t believe it was a ‘this solution can’t work,’ it was more of a ‘we choose to focus on different solutions while other players focus on cash on chain’.”

SWIFT is aware of blockchain and its advances within the cross-border payments industry. At some point, the banking juggernaut even ran a proof-of-concept (PoC) of blockchain to see if it could pick up the technology for itself, but was left somewhat disappointed with the results. In March 2018, the co-operative declared that blockchain was not ready for mainstream use as “further progress is needed before it will be ready to support production-grade applications in large-scale, mission-critical global infrastructures,” although the tests went “extremely well.”

That seems to be the main consensus for traditional banking players that have chosen to stay away from blockchain: The technology has a lot of potential but is not mature enough to be picked up for industrial-scale use. The list of such lenders includes the Bank of Canada (BoC), the Spanish bank BBVA and the Bank of England, among others.

Sawhney told Cointelegraph that, whatever the outcome of the competition among blockchain-powered platforms and SWIFT is, the nearly 50-year-old conventional system is now being forced to update. Indeed, apart from testing blockchain, in February 2017, the banking network launched its Global Payments Innovation (GPI) service. While GPI promised “faster, same day use of funds,” it is technically a messaging system, and despite supporting real-time, end-to-end tracking, it is not blockchain-based.

“The battle is on for near-instant transactions, complete transparency and thorough transaction tracking, low clearing costs, and compatibility with any currency or asset type,” Sawhney said. “It has just begun, we are still a long way from getting a firm answer on which solution will dominate the future of the global payments industry.”

Posted on

Citi Once Had Plans To Launch A (Centralized) Crypto Asset, But Failed To Execute

Wall Street Mainstay Pulls Out Of Crypto Plan

In an exclusive report from CoinDesk, it was revealed that Citigroup, one of the world’s largest financial institutions, was revealed to have once pulled out of a plan to launch its own crypto asset. The thing is though, such a venture purportedly started in 2015.

Gulru Atak, one of Citi’s global heads of innovation, told the outlet that Citi’s research and development team, who have centered their efforts around “making meaningful improvements in the existing rails,” once established a project called “Citicoin.” The digital asset, which was nothing more than a proof of concept created by Citi’s Dublin innovators, was once internally touted as a way to bolster global, digital-based payments.

But, after weighing the costs of the prototype, Citi pulled the rug out from under the project, as it determined that there were better ways to “improve the existing [payment] rails.”

Instead of offering its own cryptocurrency, which would likely be centralized beyond compare, the New York-headquartered firm is looking into integrate blockchain into legacy systems, removing the need for a coin that may just complicate things. Atak remarked in closing:

“[CitiConnect’s goal] was purely to integrate into a blockchain-enabled system on our client’s end and make it connect to our legacy payment processes real-time… “

Details of Citicoin are hard to come across. But, many have drawn lines between the experiment and newfangled product from JP Morgan.

JP Morgan Only Doubles Down

Down the street from Citi, the financial pillar has begun a pilot for what is best known as JPM Coin, a U.S. dollar-backed stablecoin based on a private version of the Ethereum blockchain. As reported by Ethereum World News when the news broke, the ledger-based token will first be used for a
“tiny fraction” of the institution’s $6 trillion in daily corporate transactions. The bank’s fintech team hopes that this venture will reduce costs.

Eventually, overt Bitcoin critic Jamie Dimon wishes for JPM Coin to be harnessed in the day-to-day, telling investors that it could one day be an asset heavily utilized by the consumer audience. In other words, Dimon and his cronies intend to see JPM Coin used in everything from buying a coffee to international billion-dollar payments.

So if Citi dropped Citicoin, why is JP Morgan going ahead with JPM Coin?

Well, the answer to this isn’t all too clear, but there has been speculation about this subject matter. What many have drawn attention to is the fact that since 2015, blockchain technologies have advanced monumentally, making centralized cryptocurrencies all the more valuable.

Anyhow, all this only underscores the level of institutional interest in this embryonic innovation. But will it be centralized and decentralized cryptocurrencies that garner adoption in the end? For now, no one is all too sure.


Photo by Anthony Ginsbrook on Unsplash

The post Citi Once Had Plans To Launch A (Centralized) Crypto Asset, But Failed To Execute appeared first on Ethereum World News.

Posted on

Hyperledger Onboards 12 New Members Including Alibaba Cloud, Deutsche Telekom and Citi

Open source initiative Hyperledger has announced 12 new members including Alibaba Cloud, Citi and Deutsche Telekom, among others.

Hyperledger has onboarded 12 new members, including such major firms as Alibaba Cloud, Citi, and Deutsche Telekom, according to an announcement published on Dec. 11.

Launched in 2016, Hyperledger is an open source project created by the Linux Foundation and created to support the development of blockchain-based distributed ledgers.

The new members were announced at the Hyperledger Global Forum in Basel, Switzerland. The latest general members that joined the initiative include Alibaba Cloud, a subsidiary of the e-commerce giant; financial services firm Citigroup, Deutsche Telekom, one of the largest telecoms providers in Europe; and European blockchain trading platform we.trade, among others.

Hyperledger executive director Brian Behlendorf said that “the growing Hyperledger community  reflects the increasing importance of open source efforts to build enterprise blockchain technologies across industries and markets.” Beth Devin, Head of Innovation Network and Emerging Technology at Citi Ventures said:

“We believe blockchain has the potential to drive new forms of efficiency and develop new markets, and are pleased to join the Hyperledger project to advance our exploration.”

This month, the Hyperledger Technical Steering Committee approved the Ursa project, a modular cryptography software library. Ursa is meant to avoid wasted work on duplicate projects, enhancing security by simplifying analysis and making it “less likely for less experienced people to create their own less secure implementations.”

In October, the central bank of Germany, Deutsche Bundesbank, and securities marketplace organizer Deutsche Boerse (DB) successfully completed the trial of a blockchain solution in the settlements area. The transaction volume and speed of a production system were tested on the Hyperledger Fabric framework and Digital Asset, a distributed ledger (DLT) solution for the financial sector.

Posted on

Former Pershing Exec Jeff Horowitz Joins Coinbase as Chief Compliance Officer

Crypto exchange and wallet Coinbase has hired former Wall Street exec and banking regulator Jeff Horowitz as its new Chief Compliance Officer.

Major U.S. cryptocurrency wallet and exchange Coinbase announced in a July 31 blog post that ex-Pershing exec Jeff Horowitz will join the company as its Chief Compliance Officer.

Horowitz previously worked as the managing director and global head of compliance at Pershing LLC — a BNY Mellon Company — as well as leading a variety of compliance and anti-money laundering (AML) programs at Citigroup, Goldman Sachs, and Salomon Brothers, and serving as a banking regulator with the Federal Deposit Insurance Corporation (FDIC).

According to Coinbase COO and President Asiff Hirji, Coinbase hired Horowitz to guide them as the company “expand[s] into new markets, and add[s] new services such as Coinbase Custody and our recently announced acquisition of a licensed broker-dealer,” adding,

“Hiring Jeff is recognition on our part that navigating compliance complexities on a global scale requires a concerted, cross-functional effort, guided by leaders with experience that spans policy, financial services, and corporate governance.”

The blog post notes that Mike Lempres, Coinbase’s chief legal and risk officer, will now be able to “exclusively” focus on the company’s government relations efforts.

Earlier this summer, Coinbase had announced the acquisition of securities dealer Keystone Capital Corp. in addition to Venovate Marketplace, Inc., and Digital Wealth LLC., in their bid to become a fully regulated broker dealer by the U.S. Securities and Exchange Commission (SEC).

At the end of July, documents showed that Coinbase had created its own political action committee (PAC), which could potentially allow the company to channel campaign donations to crypto-friendly politicians.

Posted on

IBM, Barclays and Citi Team Up to Launch Blockchain App Store for Banks

Even private and permissioned blockchains need to build ecosystems and achieve network effects, just like their permissionless, public counterparts.

At least, that’s the thinking behind LedgerConnect, a financial blockchain “app store” that aims to make it easier for banks to access distributed ledger technology (DLT) solutions from fintech and software providers, and for those vendors in turn to reach bank customers.

Announced Monday, LedgerConnect is the offspring of bank-owned currency trading utility CLS and enterprise software giant IBM, and counts major banks Barclays and Citigroup among its founding members.

In fact, nine financial institutions are participating in the proof of concept (PoC) and have selected services from a number of vendors including Baton Systems, Calypso, Copp Clark, IBM, MPhasis, OpenRisk, SynSwap and Persistent Systems.

On LedgerConnect, financial institutions will be able to access DLT-based services in areas such as know-your-customer processes, sanctions screening, collateral management, derivatives post-trade processing and reconciliation and market data.

This new hub will address a connectivity gap, where upstart fintechs and large tech firms alike are faced with the cost and complexity of spinning up their own distributed networks so banks can consume their various applications, according to Keith Bear, IBM’s vice president for financial markets.

“Having a secure network and proven infrastructure allows an app store kind of model, where banks can identify applications from certified fintech and software providers and deploy these apps over a seamless blockchain network,” Bear told CoinDesk.

For Barclays, one of the most active banks in the DLT field, the app store is a way to test out a new approach.

Dr. Lee Braine of the investment bank CTO office at Barclays, explained that there are several different deployment options to consider when architecting distributed ledgers for live environments.

For example, if a financial market infrastructure provider like CLS is providing the governance and business services for a particular use case, then there may be an option for that market infrastructure provider to also host the nodes on behalf of the banks in order to accelerate the initial speed to market, said Braine.

“Some banks may also look to explore the more decentralized deployment option of hosting their nodes themselves,” said Braine. “By participating in the LedgerConnect proof-of-concept, Barclays is gaining experience of a distributed ledger private network aimed at connecting both market infrastructure-hosted nodes and bank-hosted nodes.”

LedgerConnect itself runs partly on a permissioned blockchain based on IBM’s blockchain platform, which in turn was built on Hyperledger Fabric, and all the apps currently in the store are Hyperledger-based. However, the founders are open to other enterprise blockchain solutions making use of the app store.   

“We are not averse to supporting other ledger implementations, whether it is R3’s Corda, whether it is Quorum (provided these techs are robust and can meet the needs we have from security perspective etc.),” said Ram Komarraju, head of innovation and solution delivery at CLS.

He added:

“Our expectation is that in principle we will not be limited to one technology only.”

Original consortium

Stepping back, CLS can perhaps be thought of as the original blockchain consortium.

Granted, it was founded in 2002 (six years before the first blockchain was conceived) to provide plumbing for FX trades. But it’s been testing blockchain technology since early 2015, before Hyperledger started and when R3 was still flying under the radar.

The early CLS blockchain efforts were later formalized into CLSNet, a way of testing blockchain to match and net trades involving a range of new currencies not on the main platform, keeping immature blockchain technology separate from the core settlement engine used by 60 large financial institutions.

“There is a lot of trade processing we do for banks and buy-side firms, without getting to the last mission-critical aspects of settlement itself,” said Komarraju.

As such, CLSNet will be one of the first applications on the new LedgerConnect portal. All these apps have been selected in the hope of removing typical reconciliation efforts and data duplication (remedies include things like capturing digitalized master agreements of derivatives contracts on a single ledger for example).

“Look at capital markets today, every bank has its own silo office systems even though they are trading typically with a counterparty that has the same type of business logic but using the same technology stack,” added Komarraju.

IBM and CLS go back a ways; the main CLS platform was built by IBM. And LedgerConnect is a way of joining the dots between their respective financial infrastructure and blockchain work, at the same time extending the blockchain work CLS has been doing beyond foreign exchange into other capital market domains.

“This is really leveraging the combination of CLS’s position as a globally systemically important market utility owned by the banks, and also IBM’s investment in that,” said Komarraju.

PoC fatigue

Unlike the average PoC, LedgerConnect is at quite an advanced state, according to Komarraju.

“We didn’t start this on Monday,” he said. We have institutions that have selected a number of use cases and these have been implemented and we are in the very late stages of proving the technology.”

While Barclays and Citi are the only banks being named at this time, big hitters like JPMorgan and Goldman, which are both part of CLSNet, are logical candidates to take part.

Another list of likely suspects are the banks on the we.trade platform, which also uses Hyperledger in the form of an IBM software-as-a-service (SaaS) model.

Explaining why CLS couldn’t reveal all the participants in LedgerConnect, Komarraju hinted that some of these big banks are experiencing a bit of blockchain PoC fatigue.

“We cannot share the names of full list of banks because we haven’t (yet) received the approvals from some of them. Some of them wanted to wait until the proof of concept is complete and others needed more time for internal approvals,” he said.

Meanwhile, Bear of IBM said the whole reason we are seeing PoC fatigue is because so many of them don’t progress. While this can be because of a weak business case, or one that doesn’t need a blockchain, oftentimes it comes down to the cost and complexity of getting a network up and running.

“In many ways we are trying to get rid of that PoC fatigue,” said Bear. “I know we have to go through a PoC to do that, but it’s kind of inevitable.”

IBM 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.

Posted on

Banks Buy Stakes in Blockchain Startup SETL

Financial services group Citi has bought a stake in blockchain startup SETL.

The move, announced today, comes less than three weeks after the French banking institution Credit Agricole also became a minority shareholder. Other investors in the startup include Computershare, Deloitte, and banking company S2iEM.

SETL noted that Computershare had boosted its stake in the blockchain startup, and that Stuart Irving, Computershare’s group CEO, is joining its board of directors. In statements, the startup suggested that, combined, it was “adding significantly to the strength [of] the company.”

“We are pleased to announce that we have extended our shareholder register with both new and existing partners and have agreed the scope of a number of revenue generating projects,” Peter Randall, SETL’s CEO, said of the investments.

The startup aims to facilitate the movement of cash and other assets between two parties using a permissioned ledger it developed. This, in turn, would make it easier to match and settle different types of transactions.

SETL previously trialed its platform with OFI Asset Management earlier last month through the startup’s IZNES fund record-keeping system, as CoinDesk previously reported.

Launched in 2015, the startup was founded by former executives from the finance space, including Randall, who is the former CEO of the Chi-X equity exchange.

Business miniatures image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

Posted on

Citigroup CEO: Bitcoin Threat Will Give Rise to State Cryptocurrencies

Citigroup CEO Michael Corbat has predicted that state-sponsored digital currencies will arise from the threat posed by bitcoin.

In an interview with Bloomberg at a summit in New York yesterday, Corbat said that cryptocurrencies represent a “real enough threat” to the financial system, and that governments wont take the disruption of their capabilities around data, tax collection, money laundering and know-your-customer (KYC) “lightly.”

He continued:

“It’s likely that we’re going to see governments introduce, not cryptocurrencies – I think cryptocurrency is a bad moniker for that – but a digital currency.”

While encouraging people to go out and try using cryptocurrencies, which he said are still “pretty clunky,” Corbat argued that the underlying blockchain technology “has potential” and should not be dismissed.

Citi is already exploring its own cryptocurrency, called citicoin, which is aimed to curb friction in cross-border foreign exchange transactions. The financial group is also working with Nasdaq on using blockchain technology for trading private shares.

Corbat’s comments come soon after Goldman Sachs CEO Lloyd Blankfein said that he isn’t “comfortable” with bitcoin, but open to its potential.

Michael Corbat image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

Posted on

Digital Dollars and Digital Pounds, Citi Executive Believes Digitized Fiat Currency is Key to Blockchain Adoption

Investment banking group Citi’s newly appointed head of core cash management for Asia-Pacific, Morgan McKenney, said that the key to the mainstream adoption of Blockchain technology is the introduction of state-backed virtual currencies. She added that the ultimate success of distributed ledger technology relies on the use of fiat currencies issued on a Blockchain.

McKenney also talked about the bank’s CitiConnect Blockchain project. The project aims to resolve the liquidity issues in the private securities market by leveraging the technology from Blockchain startup company Chain. She said that to fully unlock the project’s potential, virtual currencies are the most ideal payment method.

McKenney also discussed how atomic swaps can be further empowered if any number of cryptocurrency assets could be bought with a Blockchain-based fiat currency.

“If you had a digital dollar, if you had a digital pound, exactly fungible with the note in your wallet and the dollar in your bank account, then you’d be willing to use that digital currency much more throughout your ongoing daily transactions.”

Other Citi projects/investments

According to McKenney, the bank has also pursued other projects aside from exploring other possible collaboration opportunities for its CitiConnect platform. Among these projects are the investments made in several Blockchain startups, namely, Chain, Digital Asset Holdings, and Axoni.

All the companies offer Blockchain solutions that don’t include a native digital currency.

She also added that the bank is currently not interested in advancing projects to explore a virtual currency outside of state-backed digital currency, it remains open for that possibility in the future.

 “I wouldn’t want to make statement that we’re explicitly ruling out anything, but we’re taking a strategic approach that reflects the earlier stage of Blockchain versus some other technologies.”