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Canadian Startup Wants to Upgrade Millions of ATMs to Sell Bitcoin

Canadian crypto exchange Coinsquare announced an initiative to turn “millions” of ATMs to bitcoin teller machines.

Canadian exchange Coinsquare has acquired software allowing traditional ATMs to sell cryptocurrency such as bitcoin (BTC), according to a press release on July 3.

Coinsquare announced a controlling investment in Just Cash, a United States-based fintech startup that has developed a software that allows users to purchase crypto directly through traditional ATM machines without the need of additional hardware or mobile application.

Following the investment of undisclosed amount, the Just Cash team will join Coinsquare in and operate under Coinsquare brand.

Coinsquare CEO Cole Diamond says that the new initiative reflects the company’s mission of bringing mainstream adoption to the crypto industry. According to Diamond, enabling crypto purchases through ATMs will make cryptocurrency “finally reach the masses.”

Though the press release does not specify how many ATMs Coinsquare is targeting for the upgrade, the startup nevertheless can now offer crypto capabilities for millions of existing ATMs around the world. 

Diamond notes: 

“By using the millions of existing ATMs around the world, we can now bridge the gap and give new users the easiest and most familiar experience to purchase cryptocurrency. Bitcoin is new and unfamiliar to many, but ATMs are not.”

The news comes amid a recent report on Canada’s city of Vancouver considering a ban of specialized bitcoin ATMs (BTMs) due to money laundering concerns.

Earlier this year, Coinsquare announced the launch of its own stablecoin backed by the Canadian dollar (CAD). In late 2018, the company expanded its business to 25 countries in Europe, prior to reports that Coinsquare laid off around 30% of its employees in January 2019.

In late June, Cointelegraph reported that the total number of BTMs reached 5,000 in about 90 countries.

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EU Banks to Deploy Instant Payments System in Response to Competition From Libra

European Union banks may have an instantaneous payments system in place by 2020.

European Union banks could have an instantaneous payments system in place by 2020, Reuters reports on June 26.

Per the report, real-time payments have been possible in the eurozone since 2017, but only about half of the banks in the bloc adhered to the initiative. Still, Reuters notes that adoption may accelerate now that Facebook’s Libra stablecoin is shaping up to be a competitor to local banks.

Director general of the European Payments Council (EPC) Etienne Goosse reportedly said that — regardless of the success of Facebook’s Libra’s project — competition from technology firms was here to stay, and banks need to evolve faster. Goosse points out that major tech firms have a significant advantage over the fragmented banking system:

“They come with a global solution, under a global brand offering many things that the consumers seem to find wonderful. […] So we have no time.”

Goosse also pointed out that, while the EPC instant payment standard has been adopted by about 60% of eurozone lenders and payment services providers, it could spread to all banks in the block by the end of 2020. Reuters also notes that other officials confirmed that 2020 was a credible target, but they also noted that for the system to go across borders the entire eurozone would need to be covered.

Lastly, Reuters notes that an instant payment system may not be enough to prevent losing user share to fintech initiatives that only need the user to install an easy-to-use mobile application. Facebook can also use its social and chat platforms to its advantage.

As Cointelegraph reported earlier today, the head of the German Federal Financial Supervisory Authority has urged regulators to develop standards in response to Facebook’s forthcoming cryptocurrency, Libra.

Last week, the Switzerland-based Bank of International Settlements (BIS) commented on the threat that the entry of major tech firms into financial services could pose to the banking sector, as Cointelegraph reported.

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Northern Trust Hands Off Blockchain Solution to Fintech Firm

Asset management firm Northern Trust gives blockchain solution to Broadridge for further development.

Northern Trust has handed over its blockchain platform to fintech firm Broadridge Financial Solutions, according to a press release on June 26.

The Chicago-based asset management firm Northern Trust has handed over its blockchain-based private equity (PE) management solution to Broadridge for further improvement.

The platform purports to streamline and automate certain tasks, such as middle office functions. The PE blockchain solution will initially roll out “to all PE funds domiciled in Guernsey and Delaware, including those administered by Northern Trust.”

Pete Cherecwich, President of Corporate & Institutional Services at Northern Trust commented on the hand-off, saying:

“For the benefit of our clients and the industry as a whole, it’s now time to hand over the reins to a technology provider with deep fintech expertise. Broadridge’s administrator-agnostic position, coupled with its DLT (distributed ledger technology) leadership and global footprint, make them an ideal firm to open up this innovative technology to the marketplace, paving the way for the digitization of the asset class.”

Broadridge partnered with the bank Santander last year to facilitate investor voting via proxies using blockchain technology. 

As previously reported by Cointelegraph, Northern Trust partnered with Big Four consulting and auditing network PwC to provide a repository of audit data on its private equity blockchain to interested parties.

The solution was reportedly built using the open source Hyperledger Fabric framework as well as the IBM Blockchain to provide security and scalability.

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President of Uganda to Lead Blockchain Conference in Kampala in July

The President of Uganda is announced to lead the 2019 Africa Blockchain Conference on the “fourth industrial revolution.”

The President of Uganda, Yoweri Museveni, will officiate the 2019 Africa Blockchain Conference, according to a report by Kabuubi Media Africa on June 24

According to the report, The 2019 Africa Blockchain Conference — not to be confused with  The Blockchain Africa Conference 2019 which occurred in April — will be held from July 3 to July 4, and the theme is ’Africa 4.0:  Preparing Africa for the 4th Industrial Revolution.’ The conference topics will reportedly include fintech, payment systems, and the future of education.

President Museveni reportedly supported the use of blockchain technology in Uganda during his inaugural speech. Museveni is said to have cited four economic areas that he believes should be supported by blockchain technology: agriculture, manufacturing and processing, services, and the ICT sector.

Blockchain tech firm CryptoSavannah will reportedly be one of the organizers for the 2019 conference. The company’s director, Noah Baalesanvu, commented on the maturation of cryptocurrencies in Africa, saying:

“While initially being marred by scams and cons, significant value has moved to cryptos with major markets like Nigeria, Kenya and South Africa with significant crypto holdings also trading activity.”

In 2018, CryptoSavannah partnered with the major cryptocurrency exchange Binance to gain financial support for blockchain growth in Uganda. Binance CEO Changpeng Zhao claimed that his organization would create thousands of jobs in the country, tweeting:

“@binance will partner with @cryptosavannah @AggieKonde @HelenHaiyu to support Uganda’s economic transformation and youth employment through blockchain, embracing the 4th industrial revolution. We will do this by creating thousands of jobs and bringing investments to Uganda.”

As previously reported by Cointelegraph, Binance Charity Foundation signed a Memorandum of Understanding with a non-governmental organization based out of Uganda this April. The MoU aims to bolster the educational system of Kampala by providing a variety of supplies, ranging from solar panels to sanitary pads.

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BNP Paribas Venture Arm Among Investors to Inject $16.5M in Fintech Firm Token

Token says it will use the investment to develop its operating system and “accelerate new ways of innovating payments with digital money and ID solutions.”

Fintech firm Token has received a $16.5 million injection from investors including the venture arm of banking giant BNP Paribas, a news release announced on June 18.

The self-described open banking platform says it will use the capital to further develop its TokenOSTM operating system — and “accelerate new ways of innovating payments with digital money and ID solutions.”

According to the company, its ecosystem enables banks, customers and developers to complete transactions securely, instantly and with less friction. Token claims more than 4,000 banks have connected to its platform, with Mastercard recently coming on board as a partner. Steve Kirsch, Token’s founder and CEO, said:

“For banks, establishing an early position in this new hyper-connected market is a competitive advantage; a new wave of independent financial apps and services will soon be available to their customers, so banks need to be clear about their future roles.”

BNP Paribas’ Opera Tech Ventures was involved in the latest funding round, as well as existing investors including Octopus Ventures and EQT Ventures.

Earlier this week, it was confirmed that Italian banks are planning to deploy blockchain technology to improve transparency in transactions between financial institutions starting next year.

On June 13, blockchain software consortium R3 revealed it is developing a blockchain platform in Brazil with three global banks. Last month, more than 50 banks simulated letter of credit transactions using one of the company’s systems.

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Visa Set to Join the Expanding Field of Blockchain-Based International Payment Providers

Visa launches a blockchain-based centralized payment settlement service for international business transactions, challenging USC and Ripple.

Visa has launched a payment system for business-to-business (B2B) transactions partially based on blockchain technology. The United States payment behemoth says its platform, called Visa B2B Connect, offers seamless cross-border payment processing for institutional clients without going through the complex web of third-party intermediaries.

In doing so, Visa becomes the latest entrant into the blockchain-based payment processing arena. This move brings the company into direct competition with cryptocurrency startups like Ripple and mainstream players, such as Barclays and BNY Mellon with their Utility Settlement Coin (USC) project under the aegis of the Fnality Consortium.

Visa B2B Connect — three years in the making

Visa first announced plans to build a blockchain-based network for business payments back in 2016. At the time, the credit/debit card payment giant said the service would be developed in partnership with blockchain startup Chain.

According to a statement issued by the former executive president for strategic partnerships and innovation, Jim McCarthy:

“The time has never been better for the global business community to take advantage of new payment technologies and improve some of the most fundamental processes needed to run their businesses. We are developing our new solution to give our financial institution partners an efficient, transparent way for payments to be made across the world.”

Visa’s initial timeline included a pilot launch in 2017, but the company had to navigate a more complicated route than initially envisaged. The company replaced Chain as its partner on the project, electing instead to go with fintech firm FIS, e-payment operator Bottomline Technologies and IBM.

Starting in 2017, the company began to announce job vacancies for crypto and blockchain experts to work on a new payment gateway. In March 2019, the company also published another job listing for specialists in crypto payment solutions.

Three years on, Visa has finally gone ahead with the launch of its payment service, which promises near-real-time settlement for B2B transactions. In a blog post published by Visa on June 11, the company described its platform as the answer to the issues plaguing cross-border transactions for businesses.

An excerpt from the company’s statement reads:

“Visa B2B Connect takes a different approach, turning weeks into one to two days. The non-card-based platform — the first of its kind — removes friction from the process by expediting transactions directly from the origin bank to the beneficiary bank — no intermediaries necessary.”

Simplifying interbank transactions for businesses

According to the company, the newly developed system aims to simplify the process of business payments around the world, eliminating the convoluted transaction flow process involved in interbank settlements for commercial payments.

Kevin Phalen, head of Visa’s Global Business Solutions, hailed the project as one capable of establishing a new paradigm for international business payments. “With Visa B2B Connect, we are making commercial payments quicker and simpler, while enhancing transparency and consistency of data,” Phalen declared.

Transaction Flow Process

In the June 11 launch announcement, the company revealed that the Visa B2B Connect platform is now available in 30 markets across the globe. Visa has plans to triple the reach of the service, making the platform operational in 90 markets around the world before the end of 2019.

From a technology standpoint, the platform isn’t a fully realized blockchain network. Rather, Visa B2B Connect takes certain elements of distributed ledger technology (DLT) to create an interbank network for business transaction settlement. The development team utilized the open-source Hyperledger blockchain base layer, created by the Linux Foundation.

Details released by Visa show that the platform is a non-card-based network made up of companies and participating banks. It allows businesses to transact directly with one another across the globe via their banks, with the Visa B2B Connect acting as the single connection between all transacting entities.

In a phone interview with Cointelegrah, Marta Piekarska, director of Hyperledger ecosystem at the Linux Foundation, explained the role of the company in the project, saying:

“We [Linux Foundation] provide the base layer on top of which developers can build their projects. Visa has integrated with the Hyperledger Fabric 1.0 to create the B2B Connect platform. They [Visa] partnered with IBM to implement the payment technology infrastructure.”

In legacy interbank transactions, there can be as many as three third-party intermediaries, each with their own fees and contribution to the throughput time of the process. Rather than a settlement occurring in 24 to 48 hours, interbank payments for business can take much longer.

A typical flow process for a payment transaction from Company A in Country Y to Company B in Country Z would look like the image below.

Legacy Banking Infrastructure Vs. Visa B2B

First, the funds move from Company A’s bank to a domestic correspondent bank (the first link in the intermediary chain). The next “handshake” involves a transfer to the main transaction authenticator (the second link in the intermediary chain) — which is most likely a regional clearing house — before arriving at the account held by the foreign correspondent bank in Country Z. Finally, the funds will move to the Company B’s bank account.

The Visa B2B Connect platform eliminates unnecessary handshake procedures and replaces them with a centralized service that connects companies and their banks across the world. Aside from reducing cost and throughput time for interbank payments, Visa says its platform solves the problem of inconsistencies in the flow of data.

By employing elements of DLT, the payments giant believes Visa B2B Connect creates an infrastructure with immutable record-keeping capabilities. If this proves true, participating businesses can utilize the predictable cost matrix inherent in the system to improve upon the accuracy of their cost and budgeting documentation. Furthermore, the system will have all the fee calculations indicated before the commencement of each transaction.

According to Visa, the new service even provides far greater payment flexibility for “one-to-many” business transactions. In such instances, Company A would wish to transfer funds to multiple businesses around the world at the same time. With so many participants involved, the usual flow process would become even more convoluted with a geometric increase in the number of intermediaries and handshakes involved.

However, with the Visa B2B Connect system, the company would need only interface with a centralized platform that handles the disbursement of payments to the receiving entities in the different banks across the globe. Participants will also be able to track the progress of the transactions in real-time, which could vastly improve the transparency of international business payments.

Blockchain technology in cross-border payments

Visa is the latest mainstream actor in the payment processing arena to announce a product that utilizes DLT in its settlement infrastructure. At the start of the year, JPMorgan Chase (JPM) unveiled the launch of its blockchain-based platform for institutional payment settlements.

As reported by Cointelegraph at the time, the U.S. banking giant also plans to launch its own cryptocurrency, dubbed “JPM Coin,” which will serve as a stablecoin facilitator of transactions between major corporations. Reports also indicate that the early iterations of the project will involve internal settlements between JPM clients.

The decision by the Wall Street behemoth struck a chord across the industry, given the sentiments previously espoused by its CEO, Jamie Dimon. Back in 2017, Dimon infamously characterized bitcoin as a fraud.

Apart from JPM, banking giants from Japan, Europe and the U.S. recently launched the Fnality Consortium with a $63 million Series A funding round. Fnality will utilize a system of USCs to facilitate cross-border payments involving many of the major fiat currencies in the world today.

Related: Bank to Basics: USC Project Seeks to Disrupt Traditional Wholesale Banking

The USC project extends even beyond payment settlement, as it aims to establish a network of blockchain-powered distributed Financial Market Infrastructures (dFMIs). These dFMIs will allow for full-spectrum value exchange transactions.

Much like Visa B2B Connect, the USC project has been four years in the making, and reports indicate that the system will be up and running by mid-2020. Some of the major banks involved in the project include some big companies, as seen below.

Fnality Stakeholders

However, not everyone believes that decentralized technology can disrupt the global payments arena. Tweeting on June 14, Henry Blodget, the CEO of Business Insider, maintained that the legacy digital payment systems worked fine and do not need to be replaced with cryptocurrency and blockchain technology. For Blodget, decentralized technology could find some application in cross-border payments, but beyond that, the mainstream avenues were still the more superior technology.

Serious competition for Ripple?

Given the target markets of these newly emerging payment networks, there is a question of whether these projects might constitute serious competition for cryptocurrency startup Ripple. Since it began operations, Ripple has consistently reiterated its intention of becoming the de facto global standard for international payment processing.

Ripple continues to sign partnerships with banks across the globe, encouraging the use of not only its ledger and payment products, but also the XRP cryptocurrency — in so, boosting its utility. With Wall Street banks and major corporations entering the blockchain-based payments arena, Ripple could face increasing competition for relevance in the evolving digital payments arena. It is, however, too soon to say which company will establish dominance when the landscape becomes fully realized.

The question could ultimately be decided by the strength of the technology offered by these different projects. Settlement layers that offer faster, cheaper, more efficient and more secure payment environments should see increased patronage, irrespective of the pedigree of the companies offering the technology.

For example, the Visa B2B Connect platform promises transaction settlement in 24 to 48 hours. This throughput time is significantly slower than that being offered by SWIFT’s Global Payment Initiative (GPI), which settles payments within an average of 24 hours.

Still, even SWIFT, the international payment network, has its sights set on blockchain technology adoption to further improve the operational capabilities of its GPI. In January, SWIFT announced a partnership with R3 to develop a blockchain-powered upgrade to its GPI technology in the hopes of further reducing the throughput time for international payments.

On the Ripple ledger, the average settlement time is around four seconds, and it can handle close to 1,500 on-chain transactions per second. Ripple also charges significantly lower fees — even when compared to other blockchain networks — with a median transaction cost of about $0.0004.

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Global Banking Giant HSBC Launches Tokenization-Based Receivables System for India

HSBC has deployed tokenization tech in its receivables infrastructure for corporate clients in India.

Major global banking group HSBC has implemented tokenization technology into its receivables infrastructure for corporate clients in India, according to an announcement on June 18.

The British multinational financial services company has reportedly launched its Digital Accounts Receivable Tool (HSBC DART), based on tokenization technology developed by Australian blockchain-powered Fintech company Identitii Ltd., the firm said in the announcement.

According to the statement, HSBC DART was developed for HSBC’s Global Liquidity and Cash Management (GLCM) business and deploys Identitii’s approach to tokenization within HSBC’s existing infrastructure of receivables to enhance involved processes.

The instrument is designed to automate the accounts receivable (AR) process for HSBC’s corporate customers and their network of buyers, enabling a secure communication layer between network participants and reducing manual work such as invoice payments documentation. Accounts receivable is the balance of money owed to a firm for services or goods provided or used but not yet paid by customers.

In the announcement, Identitii revealed HSBC’s plans to expand HSBC DART in new markets in Asia.

Originally founded in 1865 in British Hong Kong, United Kingdom-based HSBC was the 7th largest bank in the world by 2018, and the largest in Europe, with total assets of about $2.6 trillion. In mid-March 2019, HSBC was reported to be seeking banking partners in South Korea to deploy the blockchain platform Voltron.

Previously, HSBC reported that implementation of blockchain tech in its forex trade settlement reduced costs of operations by 25%.

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Appetite for Blockchain Tech Builds Among Korean Banks, but Without Crypto

Korean banks push for blockchain adoption as former high-level officials join the space.

In recent weeks, major South Korean financial institutions have rolled out a number of services incorporating blockchain technology, especially in the areas of Know Your Customer (KYC) procedures and security. Fintech has become a buzzword for local banks trying to keep up with the change of the times.

The banks, however, are not looking into an important part of blockchain, which is digital assets, says one influential Korean advocate of alternative currency. In order to assess the Korean blockchain space, it is important to understand how the trend affects existing players and the cryptocurrency market.

Blockchain as a ledger

Shinhan Bank, the first bank to be established on the peninsula, incorporated blockchain into its lending services on May 27.

The bank’s “Blockchain Verification System” allows users to receive evidential documents on private enterprises. Through this system, it has shortened the process from two to three days to almost instant verification.

KB Kookmin Bank, one of the largest banks in the country, signed a memorandum of understanding (MoU) with blockchain firm Atomrigs Lab, as Cointelegraph reported June 11. The partnership is designed to explore digital asset management and protection solutions.

What differentiates Atomrigs Labs from other blockchain developers is that it specializes in the financial sector and is known to have the technology to retrieve private keys in case of loss.

The latest move is part of KB Kookmin’s strategic blueprint to make the promotion of digital transformation a priority. Last year, the bank announced it will focus on technological improvements using the acronym “ABCDE” — standing for artificial intelligence, blockchain, cloud, data and ecosystem.

KB Kookmin has also signed an MoU with LG Corp., and is currently developing a joint product currently being called Magok Pay. The nickname comes from where the LG Science Park is located in Seoul.

The payment system using LG CNS’ technology, the IT subsidiary of the umbrella company, is aimed at allowing users to pay with tokens on their smartphones without cash or a bank card.

In turn, the retail lender will pay the amount and manage the transactions in fiat. It was ranked the world’s 60th-largest bank in 2017 based on Tier 1 Capital.

Since April, NH Savings Bank started offering a peer-to-peer financial certificate service, which aims to prevent the tampering of records of receivable principal and interest. More recently, it has also opened a new training course to some of its workforce to groom them to be well-versed in digital ledger systems.

The bank is an extension of the National Agricultural Cooperative Federation’s financial operations and serves some 20 million customers.  

In an interview with Cointelegraph, Sung-jung Kim, the head of Asia for Cindicator — an analytics provider of traditional and digital assets using collective intelligence and machine learning models based in Seoul, St. Petersburg and New York — said the recent race to blockchain adoption by Korean retail banks can be categorized into either the institutions developing their own private blockchains or searching for hybrid options that are already available in the market. According to Kim:

“The Korean economy is heavily dependent on a few large institutions within the nation and as these institutions continue their pursuit for appropriate blockchain solution, we expect more resources to be deployed to enrich the blockchain landscape, especially towards domestic projects.”

It is worth noting both KB Kookmin and NH Savings bank came under regulatory scrutiny last year from Korea’s Financial Supervisory Service (FSS). In its joint review of the banks, the financial watchdog criticized their management of cryptocurrency transactions in regard to Anti-Money Laundering (AML) regulations.

The FSS is Korea’s integrated banking regulator that examines and supervises private lenders under the oversight of the Financial Services Commission.

Related story: State of Regulation in South Korea: Banks Required to Provide Fair Services to Crypto Exchanges

KEB Hana Bank, another household name, began offering its blockchain-based payment system called Global Royalty Network — or GLN — in Taiwan in April.

Later this year, the bank also plans to issue debit cards that double as ID cards to university students.

Using the digital ledger, the reissuing duration will be shortened to three days from the current three weeks, in case of loss. Korea University students will be the first beneficiaries of this service.

Woori Bank is also working to launch a blockchain-based international wire transfer service. The bank already has a strong presence in India and China and is now working with the Japanese bank consortium SBI Ripple Asia to prepare a pilot.  

Shadow over cryptocurrency continues

Despite these developments, there has been a lack of interest in using the technology for settlement, payment and the use of cryptocurrency.

One of Korea’s biggest crypto influencers, Hyun-sik Choi, better known as Soso to his 40,000 viewers and subscribers, believes more needs to be done:

“Korean banks are jumping into the blockchain field. While this proves there is huge interest in the technology from traditional finance, all the attempts are on the tech side. They are ignoring the cryptocurrency part.”

The longtime crypto advocate explained there are two main reasons.

The government separates cryptocurrency from the blockchain technology and only supports the latter. A smaller but definitely noticeable part is that some companies use the term blockchain more as a marketing tool rather than a real solution.

Cindicator’s Kim is hopeful the technology’s overall adoption by traditional market participants can bring about desired influence to digital money:

“We view this as a positive development for the Korean crypto market. These developments can also be seen in the light of the high interest the Korean population has in crypto assets, probably leading to banks wanting to participate in the potential boom.”

From hoodies to suits

With the spike in blockchain adoption by traditional financial institutions comes the change in the players’ demographic.

On June 11, the Korea Blockchain Association announced its nomination of Gap-soo Oh, former deputy governor of the Financial Supervisory Service, as its next chairman. He is scheduled to be sworn in on June 24 during a general meeting.

As Cointelegraph has reported, 70-year-old Oh is now serving as the president of the Global Finance Society, and previously worked as deputy chief of the Standard Chartered Bank Korea, and as an external director at KB Kookmin Bank.

In recent months, more former civil servants and traditional bankers have switched over to digital assets. Crypto watchers in the country are welcoming this trend.

Jun-heon Hwang — better known for his blog Coin Student — says the merging of traditional and digital finance worlds is part of a wider trend across the globe:

“Overseas, traditional financial firms have already entered the digital assets market and that includes its workforce. There are enough young CEOs in the space. To systemize blockchain incorporation, onboarding of established bankers and civil servants in this sector is not only inevitable but necessary.”

Following the money — in fiat

The strong inclination to adopt the new technology comes on the back of staunch support from Seoul.

The government of South Korea nearly doubled its projected spending on blockchain development for selected cities around the country for this calendar year from the same period last year.

In 2018, the government allocated less than 4 billion Korean won ($3.4 million) to seven blockchain projects. For this year, the allocation was expanded to a dozen projects for 8.5 billion Korean won ($7.17 million).

Whether the support for the ledger side of blockchain technology will eventually lead to a trickle-down effect on cryptocurrency in the future in South Korea remains to be seen.

For now, all eyes are on how Korean buyers will affect the global market if — or when — the government relaxes its regulations on digital assets. If the East Asian country’s influence on the price of major coins is any indication, domestic buyers are expected move with unforeseen alacrity.

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VP of Largest Brazilian Bank: Local Banks to Soon Introduce Unique Blockchain Platform

Mauricio Minas, vice president of Bradesco bank, stated that Brazilian banks will adopt an unnamed blockchain platform on June 12.

The vice president of Brazil’s biggest bank, Bradesco, revealed that major local banks will introduce a unique blockchain platform on June 12, Cointelegraph Brazil reports on June 11.

Bradesco VP Mauricio Minas has delivered a speech devoted to the role of blockchain in the global financial system, speaking at major Latin American banking and fintech event CIAB Febraban on June 11.

The Bradesco VP unveiled the plans of local banking institutions to soon adopt an unnamed blockchain-powered solution, adding that a number of Brazilian banks have been developing applications using distributed ledger technology (DLT).

Speaking at the event, Minas expressed confidence in blockchain technology despite its nascent character, urging that the technology is able to “break traditional barriers,” as well as to change user behavior and the financial system.

The news comes on the heels of the recent report on Brazilian banks deploying a standardized blockchain identity solution co-developed by the country’s central bank, CIP, and global tech giant IBM.

Based on the open source DLT Hyperledger Fabric, the identity solution will be reportedly integrated into the Brazilian Payment System and will be used by all banking and financial institutions across the country.

Yesterday, Cointelegraph reported on leading cryptocurrency company Ripple’s launch of an office in Brazil with the wider aim to expand across Latin America.

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Bank to Basics: USC Project Seeks to Disrupt Traditional Wholesale Banking

The Utility Settlement Coin (USC) project has the potential to disrupt the banking sector with crypto payments.

On June 3, the Utility Settlement Coin (USC) project, one of the most ambitious crypto-based initiatives in mainstream finance, announced that it had taken the next step in its progression: the creation of a new company called Fnality International and the completion of a 50 million British pound ($63.2 million) Series A financing round.

The momentum for USC has been growing since 2015, when the initiative was launched by financial giants UBS, BNY Mellon, NEX, Santander and Deutsche Bank, along with blockchain startup Clearmatics. It’s important to note that USC is not a digital currency that individuals can invest in or use to make payments. The essence of the USC project is to create blockchain-based cryptocurrencies to make it easier for international banks to settle various transactions between each other. According to Fnality, USCs are 100% fiat-backed currencies held in respective central banks “with convertibility into fiat currency at par guaranteed at all times.”

In an interview with Baker McKenzie, Hyder Jaffrey, head of strategic investment and fintech for UBS, one of Fnality’s founding shareholder companies, said the project could well function as a catalyst for a future in which banks commonly issue their own virtual currencies, as there are not yet central bank digital currencies (CDBCs):

“Perhaps we might expect a CDBC timeline of 5-10 years, maybe even longer. We don’t want to wait that long to realise the benefits digital currencies can bring to banking, so we are looking to launch USC in 2018. It is essentially a stepping stone to a time when central banks might issue their own digital currencies.”

At first, five fiat currencies will be supported — CAD, EUR, GBP, JPY and USD — although Fnality indicated that other currencies will be added in the future.

How will USC improve banking?

As it stands, banks that wish to carry out international transactions face a convoluted and often time-consuming process as the funds pass through a network of clearing houses and foreign exchange markets if the banks are using different currencies.Third-party involvement may increase fees, in addition to prolonging the time it takes to process international transactions. As a result of the complex way in which international transfers are carried out, they may take a full day to process under the current system.

HSBC’s head of fintech partnerships and strategy, Kaushalya Somasundaram, commented that USC represents an opportunity to improve on the current transaction infrastructure:

“The settlement coin will be a collateralized digital currency, backed by cash assets at a central bank, which allows us to transfer ownership easily through the exchange of USCs, thus reducing process complexity and the time taken for settlement.”

The method proposed by USC seeks to streamline and reduce settlement, counterparty and systemic risk. As per USC’s scheme, banks seeking to carry out international transactions transfer the required amount to the country’s central bank. Once this has been received, Fnality issues the equivalent amount in USCs and deposits them into the necessary commercial bank for the other party. This balance is immediately deposited to the clients’ personal account in the required local currency. Although this system may appear complex, Fnality CEO Rhomaios Ram believes the process could well become almost instantaneous.

Laura Noonan, United States banking editor for the Financial Times, gave her take on the latest USC developments on the paper’s June 4 edition of the “Banking Weekly” podcast. Noonan outlined the general idea behind USC, emphasising its wholesale banking focus:

“What they’re looking at is whether they can make the trading system safer and faster by using coins to settle trades instead of the traditional digital money transfers. They basically spent about three years looking into this issue. Having done a lot of research, they think that coin would indeed be a faster and better way to transfer money between banks.”

Noonan elaborated on how USC would work with central banks to create coins for different currencies, which would help stymie any potential volatility:

“So, you would have different coins backed in different currencies. If you wanted to do a euro trade, that would be done in the euro settlement coin that would be backed by euro at the ECB. If you wanted to do a dollar trade, you use a dollar coin and that’s backed by dollars at the Fed. That also takes away the volatility of the currency issue.”

Guy Libot, senior general manager of shared services and operations at KBC, said in a press release that USC represents an opportunity to simplify liquidity management:

“USC will be an enabler for tokenized markets and also offers a significant opportunity to simplify liquidity management, using one digital cash asset for as many settlement needs as possible. It opens the door to 24/7 peer to peer wholesale payments in different currencies.”

USC project gives birth to Fnality International

More than two years on and the backing for USC is growing. According to a press release published on June 3, USC’s project partners have now become founding shareholders in Fnality International. The fledgling company counts some of the industry’s heaviest hitters as founding shareholders, including:

Fnality Stakeholders

In the Fnality press release, Ram announced the launch and outlined the company’s primary objectives:

“We are delighted to launch Fnality, the commercial realisation of the USC Project. Working with our founding shareholders, we will start the regulatory approval process right away and look forward to connecting to the first business applications as soon as possible. USC will be an enabler for tokenised markets and also offers a significant opportunity to simplify liquidity management using one cash asset for as many settlement needs as possible.”

Fnality refused a Cointelegraph request for details about the latest investment. However, Series A funding rounds are usually only held once the product in question has established a solid reputation and presents a decent opportunity for investor return. Fnality did tell Cointelegraph that the investor response was broad and indicative of demand for the product:

“Investment was from banks globally and from Nasdaq, a financial market infrastructure and market technology provider. The broad interest shows the overall conviction in our industry that we need to look at tokenisation and peer-to-peer markets.”

Ram echoed the sentiments of this promising investment stage in an interview with the Financial Times, stating that any initial insecurities have been assuaged by the flood of capital from investors:

“When we started out…this project has basically been about R&D, we didn’t know if the characteristics [we wanted to achieve] were possible. The funding signals that it is possible. The investors believe it is possible based on the evidence they have seen.”

The projects’ ambitions appear to have grown in line with support for their product. With the founding of Fnality, the project will now encompass legal, regulatory, operational and technical issues, and is set to draw up a regulated network of distributed Financial Market Infrastructures (dFMIs) that will support the international exchange of value transactions. Fnality will also ensure that all transactions are conducted in accordance with local settlement finality laws and regulations.

Lee Braine, the chief technology office at Barclays, told the Financial Times that, although the bank’s confidence in USC had grown “meaningfully,” he expected the impact to be gradual, stating that “this ultimately is a market transformation over time.”

Fnality has also stated to Cointelegraph that innovation in the financial world often takes time, and even when there are prominent issues, solutions can sometimes take years to be successfully implemented:

“Thinking through what financial services needs as infrastructure requires both consensus and time. These things do not happen quickly; Bankhaus Herstatt collapsed in 1974, CLS, the market infrastructure to address the settlement side of the FX industry’s shortcomings, went live in 2002.”

How is the project being received?

Cowen Washington Research Group foresees little resistance for USC in the U.S., stating that banking agencies such as the Federal Reserve are likely to support the project as it seeks to simplify the complex, cross-border transaction process. Although the Securities and Exchange Commission (SEC) usually looms large as a hostile gatekeeper for U.S.-based crypto projects, Cowen analysts do not see this being the case for USC:

“The SEC is most worried when tokens are sold to individual investors. The issue is whether these are really securities that require disclosure. In this case, the USC is not being sold. It is merely a tool that banks can use to complete transactions.”

The lack of a consumer or individual investor angle leads Cowen analysts to believe that U.S. policymakers will also be supportive of the initiative:

“We see nothing that would trigger the ire of Democrats or Republicans on Capitol Hill. As a result, it is hard to see Congress holding hearings on the USC. And even if there was a hearing, it would likely be more informational than critical.”

Founder of Post Oak Labs and influential figure in the crypto community Tim Swanson tweeted his support for the project:

As part of the same Twitter thread, Swanson outlined what he viewed as important characteristics of USC:

“In short: central bank reserves are held in a segregated account and tokenized so that they can be used for settling transactions. this is not commercial bank money.”

Swanson previously emphasised in an article published on fintechpolicy.org the fact that USC’s corresponding funds will be held exclusively in central banks differentiates it from other stablecoin projects, which use more risk-prone commercial banks:

“Even a deposit made by companies into a commercial bank account ultimately bears the credit risk of that specific bank: it could collapse, force a haircut onto depositors, freeze assets at the request of the court, decide to shut down accounts, and at least a handful of other issues.  We all witnessed the consequences of these risks first hand with the sorrowful collapse of retail and commercial banks during 2008 – 2009.”

Swanson elaborated on other characteristics of USC:

“Another interesting characteristic of USC / Fnality is how the business, legal, economic, and technology model is tightly intertwined. because participation is P2P and requires “global state,” you end up without an intermediary or a single-point-of-failure.”

Although the project could represent an important step forward for wider crypto adoption in the financial world, USC was not met with universal acclaim in the crypto community. Co-founder and partner at Morgan Creek Digital and Bitcoin advocate Anthony Pompliano published a tweet on June 3 that outlined his skepticism regarding the project:

Although this project is clearly not intended to have an impact on individual investors, it’s not difficult to see how the lack of decentralization within the USC project would rile crypto purists. While this is certainly a big step forward for crypto and blockchain usage in the financial world, it’s hardly the democratic transformation that many in the crypto community have long been anticipating.

What are the prospects for impact?

Back in August 2017, Bloomberg’s Carline Hyde discussed the early signs of a thaw in relations between the crypto sector and banking:

“They’re tightening up on cybersecurity and this is where I think it gets interesting because banks have been slightly worried about the cryptocurrency speculation because a lot of it has been linked to not quite above board behaviour. But now the fear of fraud has been cut out and they’re really starting to show an area of growth and underlying efficiency for banks and huge disruption could occur for the financial industry.”

Although USC is not yet operational, Noonan said that this is definitely a project to monitor as it has major potential to disrupt the banking industry:

“Because you have big banks in there that allows them to achieve a level of critical mass. I think if this does in fact make trading safer and faster, it’s hard to see why other banks wouldn’t want to get involved. I think we should watch this space and we might be surprised how impactful this ends up being”  

Fnality told Cointelegraph through email that, although there is widespread support for the initiative, a few hurdles still lie ahead for the USC project:

“The central banks are aware of this initiative. Connecting use cases to each currency easily; that work is ahead of us, coordinating and orchestrating with both our shareholders and potential business partners, such as exchanges and trading venues to connect them to USC.”

KBC Senior General Manager ICT Rudi Peeters, also stated that KBC, one of Fnality’s founding shareholders, is bullish on blockchain:

“Blockchain is a magnificent technology that has the potential to disrupt every existing business model. Being a threat on the one hand, it offers huge opportunities on the other hand. For the financial world, realizing cash on ledger is a true milestone.”

JPMorgan Chase wields a rival coin

As blockchain and crypto solutions come in from the cold, other financial institutions are starting to implement coin initiatives. U.S. banking behemoth JPMorgan Chase (JPM) announced it will launch its own cryptocurrency in an interview with CNBC on Feb. 14.

The token, dubbed “JPM Coin,” seems set to provide USC with some competition, as the multinational bank reported that its coin will focus on improving settlement efficiency. It appears that JPM Coin will first tackle settlements between major corporations, which also suffer from a similarly convoluted settlement process using the existing options, such as the SWIFT international payment network.

Umar Farooq, who is responsible for JPM’s blockchain focus, was optimistic about the potential for an increase in blockchain implementation at the bank:

“So anything that currently exists in the world, as that moves onto the blockchain, this would be the payment leg for that transaction. The applications are frankly quite endless; anything where you have a distributed ledger which involves corporations or institutions can use this.”

For now, it seems that JPM Coin’s usage will be limited to settlements, treasury services and securities transactions. However, Farooq mentioned that it could be worked into other areas of the company’s activities some time in the future. For now, only a relatively small amount of the total funds involved in the three areas will use JPM Coin. According to Farooq, “The applications are frankly quite endless; anything where you have a distributed ledger which involves corporations or institutions can use this.”