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SEC’s Finhub to Host Public Forum on Blockchain, Digital Assets in May

The U.S. SEC has announced that the agency will host a fintech forum focusing on DLT and digital assets in May.

United States regulator the Securities and Exchange Commission (SEC) has announced that it is hosting a public forum on distributed ledger technology (DLT) and digital assets this May. The news was revealed in an SEC press release today, March 15.

The commission’s Strategic Hub for Innovation and Financial Technology (Finhub) has organized the event — dubbed the Fintech Forum — which will take place on May 31, 2019. The press release reports that the forum will include industry experts as panelists and is “designed to foster greater communication and understanding around issues involving DLT and digital assets.”

According to the announcement, topics to be covered during the forum include initial coin offerings, cryptocurrency platforms, “DLT innovations, and how these technologies impact investors and the markets.”

The agency reports that the forum is the second in the Fintech Forum series, the first taking place in November 2016.

The event — which is open to the public — is set to take place at the SEC’s headquarters in Washington D.C., the announcement notes.  

As previously reported, Finhub was created in fall 2018 with the aim of facilitating the agency’s engagement in fintech-related fields, including DLT and digital assets.

This week, the SEC also announced that Finhub will host a series of local peer-to-peer meetups across the country with the aim of engaging more actively with the crypto and wider fintech community. The first scheduled meetup is set to take place in the San Francisco area on March 26, at the SEC’s regional office, before extending to other offices across the country.

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German Bank Association: New Regulation for DLT-Based Securities May Be Necessary

The German private banking association foresees that the need for new regulation may arise from the emergence of DLT-based securities.

The Association of German Private Banks (Bankenverband) foresees that a need for new regulation may arise from the emergence of distributed ledger technology (DLT)-based securities. The association expressed its concerns in a post on its official website on March 11, Cointelegraph auf Deutsche reported.

Per the post, if securities are issued using new technologies, then there is a need for new safekeeping and settlements processes. According to Bankenverband, corporate actions and securities trading may also be subject to change because of DLT-based securities.

The statement further explains that because of the changes that new technologies will create in business processes, “adaptations of civil and regulatory requirements at national and European level may be necessary.”

Recently, the German Federal Ministry of Finance also published a key issues paper on the treatment and regulation of blockchain-based securities.

As Cointelegraph recently reported, German regulators and lawmakers have thus far failed to create a workable legal framework that would provide legal certainty for applications of blockchain technology.

The news came shortly after German parliamentary representatives have argued that the country’s blockchain strategy should include an appropriate legal framework for cryptocurrency trading and token issuance, which would in turn encourage the sector’s domestic development.

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Deutsche Boerse, Commerzbank Complete Blockchain PoC for Legally Binding Repo Transaction

German financial services firm Commerzbank and securities marketplace Deutsche Boerse have completed a PoC for a legally binding repo transaction using blockchain tech.

German financial services company Commerzbank and securities marketplace Deutsche Boerse have completed a proof-of-concept (PoC) for a legally binding repo transaction using distributed ledger technology (DLT). The news was reported by Cointelegraph auf Deutsch on March 6.

A repo transaction is commonly used for short-term borrowing, and allows dealers to sell securities to investors — often for as short a time as overnight —  and repurchase them the following day, or as otherwise determined. For the party selling the security, the process is termed a repo, whereas for the counterparty, it is known as a reverse repurchase agreement.

For the DLT-enabled PoC, the repo transaction was based on a 10 million euro ($11.3 million) bond issued by KfW Bankengruppe, for a term of seven days at a negative interest rate of -0.5%.

As Cointelegraph Deutschland reports, to settle the transaction, Commerzbank and Deutsche Boerse generated digital tokens for both commercial bank money and securities. These were then simultaneously exchanged using a Commerzbank-operated DLT platform.

While Commerzbank’s R&D unit “Main Incubator” developed the DLT platform, the full scope of the technology used for the DLT-powered repo transaction PoC — as well as its underlying legal concept — was reportedly developed jointly by the two partners.

As a Commerzbank press release notes, the use of DLT to enable the legally compliant, efficient and transparent settlement of tokenized securities and cash tokens offers distinct advantages over existing legacy systems. These include real-time monitoring, a shortened settlement period, reduced counterparty risk, and a corresponding reduction in operational costs.

Michael F. Spitz, CEO of Commerzbank’s R&D unit, has given a statement on the significance of the PoC, noting that:

“In past [DLT] pilots we have focused on new issue projects; with the transaction between Deutsche Boerse and Commerzbank we were now for the first time able to convert existing securities into digital tokens.”

As the press release outlines, banks often use repo transactions as secured money market instruments in order to cover their “short-term liquidity needs by depositing securities.”

As Cointelegraph has reported, Deutsche Boerse recently revealed that it is making significant progress with its blockchain-powered securities lending platform, co-developed with Luxembourg-based blockchain liquidity management platform, HQLAx. To date, six banks have reportedly confirmed their plan to join the platform, which uses enterprise blockchain consortium R3’s Corda platform as its base.

Last month, Commerbank conducted a pilot for money market security transaction using a Corda-based platform, in partnership with major technology firms Continental and Siemens.

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The Bahamas Plans to Become a Leading Blockchain Hub

An NGO in collaboration with some institutions announced plans to establish blockchain developers in the Bahamas. The group also aims to place the Island at the forefront of distributed ledger technology (DLT) adoption.

A Leading Blockchain Hub in the Caribbean

According to The Nassau Guardian, an NGO known as the Caribbean Blockchain Alliance (CBA) is seeking to establish a group of decentralized technology developers in The Bahamas. In a press release, Stefen Deleveaux, founder of the CBA, talked about the inherent opportunities found in decentralized technology.

The founder further explained thus:

Blockchain technology is seen as the next step in Internet and financial technology, in what many describe as Web 3.0. There is a huge opportunity to use this technology to improve public and private services in this country. In addition, competent blockchain developers are in high demand, in an industry that almost guarantees access to a high-income job or potential project.

Deleveaux also said that part of the objectives was to build several cohorts of DLT developers. The CBA founder also recognized the importance of blockchain technology in software infrastructure as the reason for the groups.

Furthermore, Deleveaux announced a collaboration involving Inter-American Development Bank (IDB), CBA, Blockgeeks, and the University of the Bahamas. These four institutions would host a hackathon. Also, twenty-five Bahamian citizens would partake in a course for decentralized technology developers, from November 30 – December 1, 2018.

The press release further stated that after the course, students would get a certificate recorded on the decentralized technology.

Michael Nelson, who serves as IDB’s Chief of Operations, added that the bank seeks to empower Bahamian citizens. With the collaboration and the incentives in place for DLT developers, Ameer Rosic, the CEO of Blockgeeks, believes that the Island could be “the blockchain hub of the Caribbean.”

Island Governments Adopting Cryptocurrency and Blockchain Technology

Blockchain technology and cryptocurrency adoption are recording high among Island governments. Some of these countries go further to aspire to become “blockchain Islands.”

Towards the end of the second quarter, the Bahamas announced plans to issue its digital currency. According to the Island, a state-owned virtual currency would help to improve its economic development and eliminate barriers.

Malta, another DLT-friendly country, is at the forefront of decentralized technology and cryptocurrency adoption. Popularly known as the “blockchain Island,” it was the first country to have a holistic legislative framework regulating DLT technology.

Furthermore, Malta introduced the Virtual Financial Assets Act (VFA) and the Innovative Technology Arrangement and Services Act (ITAS). Both Acts would regulate virtual currency and decentralized technology.

However, Marshall Islands’ plan to adopt cryptocurrency isn’t receiving complete support. President Hilda Heine’s announced moves to create a virtual currency that would act as a legal tender but received a “no confidence motion” from some of the country’s senators. The IMF and the U.S. also disagreed with the president’s plan.

Image courtesy of Shutterstock.

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Infinity's End? $31 Million NEX Project Could Be Biggest Casualty of DLT Cuts

Project Infinity, launched in May 2017 by NEX Group (formerly ICAP), could be the biggest bloodletting the distributed ledger sector has seen to date, having cost roughly $31.7 million and hemorrhaged dozens of jobs, former employees say.

Spearheaded by Jenny Knott, former head of NEX Optimisation, the project had a grand vision of bringing the company’s entire post-trade services portfolio onto one interoperable blockchain architecture. However, NEX issued a profit warning in October 2017 and just two weeks later Knott left the company.

In a blow for the nascent project, the results statement specifically said the investment in blockchain had reduced margins by 4 percentage points.

Sources say a deal to sell the business to CME for $5.5 billion, announced by NEX boss Michael Spencer in March 2018, was a driver in the cost cutting at the firm.

A former NEX executive, who spoke on condition of anonymity, told CoinDesk: “They scaled it back significantly. [Spencer] was not going to invest another penny that wasn’t going to get him short-term revenue.”

A blockchain industry source who said his company had been hiring former staff from Infinity, went further, alleging the project had not just been scaled back but had actually been “canned.”

“They got rid of Knott and then they quietly canned the project about two months ago; 47 out of 50 staff were fired,” said the source.

CoinDesk spoke to five former NEX employees, who all confirmed the extent of severe staffing cuts, if not the specific figures. One reported that, in his particular division, nine out of 10 jobs were lost, adding that there were a few divisions like his; another affirmed the figure.

“The people doing the strategic work mostly all disappeared,” he said.

In terms of the spiralling cost of the project, one former employee said NEX made a mistake when it decided to make Infinity a “program,” which brought added costs and expectations.

“When you make something into a ‘program’ it means hiring all these people who plan things and do tons of spreadsheets and so on,” said the former employee.

“There was an enormous group of people doing business requirements, managing user groups for opinions. Some of that stuff is necessary, but not at the scale it was done,” he continued.

Another cost factor related to Traiana, the division of NEX most closely linked to the project, they said, which was doing a upgrade of its infrastructure that ended up on the project’s books, thus increasing perceived costs.

It’s alive

Still, NEX itself is disputing the claims of former staffers.

Andres Choussy, CEO of Traiana, said Project Infinity had absolutely not been shelved. On the contrary, he said it has entered the execution stage in a live environment with blockchain builder Axoni. However, he admitted the project had been scaled back.

“[Infinity] had a vision; the vision is a sound vision which we still would love to try and get to one day. But we are being realistic,” said Choussy.

“You see this from a lot of the DLT initiatives, moving the market into something completely new is not an easy task, so what we have done is focused our efforts into specific applications, specific use cases that really are plan-driven,” he said.

NEX could not comment on the number of jobs shed at the project, but confirmed the number of staff involved had been reduced. No specific numbers were provided by the company.

Choussy said the DLT part of the project had been narrowed down to focus on post-trade FX.

Indeed, NEX was a returning investor in the recently announced Series A funding round in Axoni, which is said to be building “a massive FX post-trade data network.”

NEX is also an investor in DLT provider Digital Asset and was one of the early members of the Utility Settlement Coin (USC) project, although a source involved in USC said they have fallen out of communication with the group.

Blockchain blues

A former engineer on the project painted a picture of the tough challenge to meet the use case requirements with DLT, followed by a missed opportunity to get a product out the door.

Axoni was selected at the outset because it provided a unique partitioning capability that few of the other vendors out of the box did, said the former NEX engineer. Throughput had been an issue to begin with but transaction processing speeded up as the project evolved, he said.

In addition to the work done with Axoni, the engineer said a Hyperledger implementation was built which achieved privacy partitioning by creating different networks, as well as an internally constructed ledger, “basically a glorified replication scheme, but with cryptographic proofs and enforced privacy controls” which could handle very high throughputs.

“We were really right at the razor’s edge of getting this stuff out the door when there was a just a massive set of layoffs and the entire team in London was let go,” he said, adding:

“The politics around the situation changed, also the company was preparing to try to make things look good for the CME acquisition.”

Machine learning

Infinity’s DLT architecture was to anchor and immortalize an extremely rich data set coming from multiple parties – brokers, banks, buy-side – which would serve as a backbone for a one-stop financial cloud offering machine learning and AI as a service on top.

In the end, this became a stinging irony. An anecdote recounted by one former employee told how the day after the entire machine learning team was laid off, Spencer returned from Davos enthused about machine learning and AI and asking what NEX was doing in that area.

A proposal for a firm-wide AI strategy was even put together, said the ex-staffer.

Opinion seems to be divided about how well the remains of Project Infinity’s blockchain might fair once NEX becomes the property of U.S. exchange giant CME. The former NEX technology team member said the original vision of an all-purpose post-trade ledger with data analytics platform still has great value and may even be the “crown jewels” in CME’s eyes.

However, the former executive was doubtful about Infinity’s progress, saying, “CME have got their own distributed ledger strategy.”

CME Group declined to comment when reached.

Image via YouTube

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UK Government Pilots Blockchain in Bid to Secure Digital Evidence

The U.K. Ministry of Justice is investigating blockchain as a possible tool for securing digital forms of evidence, its deputy director said Thursday.

The idea is that the technology can be used to simplify court processes for handling digital evidence, according to Balaji Anbil, who is also the head of digital architecture and cybersecurity at the Justice Ministry.

The agency involved in the test is Her Majesty’s Courts and Tribunals Service (HMCTS), and according to Anbil, a working group focused on the tech recently held its first meeting on the matter.

In the Thursday blog post, Anbil explained that “as an architectural style, distributed ledgers enable new innovative data solutions that support both high degrees of integrity and [decentralization].”

Anbil added:

“At HMCTS, we are passionate about the application of novel solutions to traditional challenges including evidence sharing, identity management and ensuring citizens have maximum control over their own information. Our service designs are focused on value, simplicity and use of the best modern technology approaches. This brings numerous benefits including cost effective and timely delivery and future proof solutions.”

Anbil explained that the technology has already been used by some European Union member nations, highlighting Estonia in particular as a country which “developed innovative citizen identity management solutions using blockchain.”

The post also noted that HMCTS will trial the technology for “inter-agency evidence sharing” later this year.

Last November, Alistair Davidson, a technical architecture lead at the Ministry, outlined the use case in a separate blog that, at the time, did not indicate that the U.K. government was moving ahead with an actual pilot.

“This property of distributing trust could be genuinely transformational in situations where public trust of government might not be taken for granted,” Davidson wrote at the time.

HMCTS image via pxl.store / Shutterstock

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Thailand's Central Bank Is Developing a Digital Currency Based on R3 Tech

The Bank of Thailand (BoT) has announced it expects to complete the first phase of a proof-of-concept trial for a central bank digital currency (CBDC) by March 2019.

The Thai central bank said in a release on Tuesday that it has partnered with eight financial institutions in the country in a bid to create a CBDC based on Corda, a distributed ledger technology (DLT) platform developed by the enterprise-focused consortium startup R3.

The ultimate goal of the effort is to use the digital currency to facilitate interbank transactions and to “enhance efficiency of the Thai financial market infrastructure,” according to the announcement.

To assist with the so-called Project Inthanon, the BoT has signed up R3 as technological partner and eight other participating institutions, including Bangkok Bank Public, Krung Thai, Siam Commercial Bank, Standard Chartered Bank (Thailand) and HSBC.

“Project Inthanon Phase 1 is expected to be completed by the first quarter of 2019 after which the BoT will publish a project summary accordingly,” the bank said in the announcement.

It continued:

“Building upon the findings and outcomes from Phase 1, the project participants aim to further develop the capabilities of the prototype for broader functions including third party funds transfer and cross-border funds transfer.”

The central bank’s governor first revealed the initial concept for the project in a speech in June, commenting at the time that the aim is to explore the potential of blockchain in facilitating cross-bank transactions before it can be formally launched at a larger scale.

With the launch of Project Inthanon, the BoT joins a growing group of central banking authorities to have started trialing DLT systems to facilitate interbank and cross-border transactions, including the Hong Kong Monetary Authority and the Bank of Canada.

The BoT also said in the release that it is currently conducting another DLT proof-of-concept designed to boost the efficiency of government bond sales.

Thai baht image via Shutterstock

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