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Abu Dhabi Global Market Concludes First Phase of Blockchain-Based KYC Project

Abu Dhabi Global Market, an international financial free zone within the capital of the United Arab Emirates, has concluded the first phase of its blockchain-based KYC project.

An international financial free zone within the capital of the United Arab Emirates (UAE) has concluded the first phase of its blockchain-based Know Your Customer (KYC) utility project, according to an ADGM press release Dec. 4.

The Abu Dhabi Global Market’s (ADGM) regulatory body, the Financial Services Regulatory Authority (FSRA) along with “Big Four” audit firm KPMG have published a review of the project’s “successful” first phase in order to provide key takeaways for members of the financial industry.

The review outlines the project’s development over a period of four months, together with a consortium of major UAE-based financial institutions – including Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, First Abu Dhabi Bank and others.

FSRA’s review of legacy KYC systems characterized them as “cumbersome, repetitive and cost intensive,” providing financial institutions with inefficient information sharing systems between siloed data sets, hampering KYC compliance and anti-money laundering (AML) monitoring.

A blockchain-based system was found to “radically simplify” the KYC process by providing an “immutable audit trail, seamless and secure data sharing,” which could moreover allow for individual clients to decide how their personal data is shared in the utility, in keeping with data protection (GDPR) and customer consent requirements.

As the review outlines, the use of cryptography and digital signatures, among other features, can contribute toward a secure, unified, and convenient system for upholding robust KYC standards across the industry.

The review also proposed the possibility of developing a commercial model of the project that could offer a fee-based rewards system to incentivize data contributors for uploading and updating their data, and charging data consumers for access.

Richard Teng, CEO of ADGM’s FSRA unit, has said the blockchain-based e-KYC project “demonstrated tangible benefits,” and would be able to “achieve significant cost efficiencies and financial inclusion driven by unified KYC standards.”

Following the successful first phase of the blockchain-based KYC project, the FSRA says it is now planning to launch its next phase, which will aim to facilitate small and medium enterprises’ access to banking services

As reported two days ago, 26 French companies and five major banks have just completed a KYC Proof-of-Concept (PoC) based on blockchain consortium R3’s Corda platform.

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26 French Companies, Five Banks Complete Blockchain-Based KYC Trial Based on R3’s Corda

26 French companies along with five banks have successfully completed a blockchain-enabled KYC trial with R3 consortium.

26 French companies and five major banks have completed a Know Your Customer (KYC) test based on blockchain, according to a press release by the entrant firm RCI Bank and Services released Dec. 3.

RCI Bank and Services, a French automotive financing and insurance firm unveiled details of a customer knowledge-focused blockchain solution trialed in partnership with blockchain consortium R3.

According to the press release, the Proof-of-Concept (PoC) test has been conducted in cooperation with the Association Française des Trésoriers d’Entreprise (AFTE), a local network of treasury and finance professionals.

As revealed by a participant of the test, RCI Bank and Services, which is also a member of the R3 consortium, trial participants were able to implement KYC requests within a shared network, with banks having to request access to data and enterprise clients able to approve and revoke access, with all the data recorded on the blockchain.

R3’s Corda KYC solution test reportedly involved five French banks, including the financial conglomerate BNP Paribas and Société Générale. The trial has also featured companies specializing in various fields such as insurance, consulting, the automotive and food industries, and retail, including such firms as Allianz France Insurance Company and Natixis Insurance.

Ignacio Sánchez-Miret, chairman of AFTE Fintech Commission, commented that the Corda KYC solution has achieved two major goals, including “bridg[ing] the gap and demystif[ying] blockchain for corporates,” as well as “bring[ing] together banks, insurers and corporates to work together at the same level,” according to U.K.-based fintech media FinTech Futures.

In early November, BNP Paribas participated in a blockchain-powered syndicated loan of $150 million in partnership with the second largest bank of Spain, Banco Bilbao Vizcaya Argentaria (BBVA).

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G20 Wants Unified Crypto Regulation and Taxation

Leaders of the G20 group gathered in Buenos Aires over the weekend and cryptocurrency was on the agenda.

A final communique was published on Sunday to sum up the meeting and part of it called for unified regulations and a global approach to digital currencies. As reported by FXstreet the organization confirmed its commitment to using all political tools, including digitalization of the global economy and crypto assets, to promote global growth.

The publication also stated that G20 leaders are seeking to “build a taxation system for cross-border electronic services.” They are reportedly already working on such a system and aim to introduce it next year when Japan will be the president of the summit. After considering proposals from each member state a final version of the regulations are expected to be implemented by 2020.

G20 participants have agreed to develop a unified approach to crypto regulation in compliance with the standards of the Financial Action Task Force (FATF);

“We will continue to monitor and, if necessary, tackle emerging risks and vulnerabilities in the financial system; and, through continued regulatory and supervisory cooperation, address fragmentation. We look forward to continued progress on achieving resilient non-bank financial intermediation. We will step up efforts to ensure that the potential benefits of technology in the financial sector can be realized while risks are mitigated. We will regulate crypto-assets for anti-money laundering and countering the financing of terrorism in line with FATF standards, and we will consider other responses as needed,”

Earlier this year high ranking officials in the French and German governments issued a letter calling for more discussion on regulating cryptocurrencies. Japan, which has recently updated its ICO regulations, has also called for a more unified global approach to digital currencies. Leading companies in the industry have also called for a code of conduct regarding digital assets.

Back in July the G20 asserted that cryptocurrencies do not pose a threat to the global financial system. However they have persevered in monitoring developments in the nascent industry. As with most nations and central banks the greatest concern is money laundering so AML and KYC regulation will be at the forefront of any discussions and decisions.

The G20 is an international forum for government officials and central bankers from the world’s 20 largest economies. Member states represent 85% of global economic output, 66% of the world’s population and 75% of international trade.

Crypto markets did not react directly to the news but have retracted by a few percent on the day as they drop back to $130 billion.

The post G20 Wants Unified Crypto Regulation and Taxation appeared first on Ethereum World News.

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Crypto is a ‘Poor Form of Money’ for Terrorists, Congressional Hearing Concludes

Cryptocurrency is a “poor form of money” for most terrorists, says director of analysis at U.S. think tank FDD’s CSIF Yaya Fanusie.

The U.S. Congress Subcommittee on Terrorism and Illicit Finance has discussed various methods of terrorism financing with cryptocurrency, according to an official press release on the U.S. House of Representatives Financial Services Committee September 7.

In order to monitor threats and methods of terrorist financing, the hearing considered major means of transferring funds by terrorists, including traditional financial institutions and semi-formal methods, such as the hawala exchange system, as well as cryptocurrencies.

However, while al-Qaeda, the Islamic State, and other terrorist groups have all attempted to raise funds through crypto, they have not had great success, as Congress concluded in the meeting.

Yaya Fanusie, director of analysis for the Foundation for Defense of Democracies (FDD) Center on Sanctions and Illicit Finance, stressed that most terrorists, especially those that serve on “jihadist battlefields,” are currently living in environments where crypto is not operable, which means that fiat use is preferable for buying goods.

Fanusie pinpointed fiat money as the most anonymous method for funding, claiming that it is very popular among terrorists.

While Fanusie stated that crypto is a “poor form of money for jihadists” and “cold hard cash is still king,” according to a Forbes article, he still acknowledged that “there are multiple examples of terrorist cryptocurrency funding campaigns.”

The expert further stated that in order to combat the potential successful use of crypto fundraising campaigns by terrorists, the U.S. government bodies that are responsible for terrorist finance investigation should become more skilled in analyzing cryptocurrency transactions. Fanusie noted:

“By preparing now for terrorists’ increasing usage of cryptocurrencies, the U.S. can limit the ability to turn digital currency markets into a sanctuary for illicit finance.”

At this point, Fanusie appeared to recommend that the authorities should focus on minor crypto exchanges that trade alternative tokens or “privacy coins” instead of major exchanges that have significantly boosted their anti-money laundering (AML) and know-your-customer (KYC) policies over the past few years.

Earlier this year, risk management giant LexisNexis partnered with crypto exchange Blockbid in order to introduce security solution for exchanges dubbed “Trade with Confidence,” which intends to prevent terrorism financing, among other illicit activities.

In January 2018, Rep. Ted Budd (R-NC) of the House Financial Services Committee introduced a bill that aims to fight terrorism by offering rewards for information that leads to convictions of cryptocurrency-supported terrorism.

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How to Make Public Blockchains Safe for Enterprise Use

Paul Brody is EY’s global innovation leader for blockchain. The views expressed are his own.


At the beginning of this year, I wrote a column predicting that companies would find the allure of public blockchains irresistible. While a world of private blockchains provides many enterprises, regulators and central banks with the comfort that there are accountable, centralized entities involved, these permissioned networks will never match the innovation or network effects that public, permissionless networks offer.

If the world of enterprise commerce remains committed to private networks, then they will have only substituted one intermediary (financial institutions) for another (software companies and hosting organizations). However, it is possible, and essential, to bring these two worlds together, and to do so on public, permissionless and decentralized networks.

In order for public networks to deliver on their promise, two key things must happen. First, regulators must provide a clear set of rules around how tokens, assets and smart contracts that exist on public blockchains will be assessed. And second, companies must implement these regulatory rules in the decentralized environment of the public networks.

The first of these is off and running. Regulators in the U.S., Europe and around the world are defining what is an asset, a currency or a security. It shouldn’t be expected that all regulators will come to precisely the same conclusions, but it does look like some early convergence is taking place: Utility Settlement Coins are being characterized as securities while cryptocurrencies are being treated more like currencies or assets.

One gap that we regard as particularly important going forward is how tokenized fiat currency will be regulated: If you have a $1 token on a public blockchain, and that is backed by one U.S. dollar in an escrow account, will that be a security or a currency and what rules might apply? So far, no regulator has specifically addressed this emerging category of blockchain tokens.

The second is that whatever the regulatory rules are, they must be implemented in tokens and smart contracts. In particular, it’s important that while the blockchain as a whole may be decentralized, a central bank should be able to issue and cancel its own currency on a blockchain and companies should be able to manage their own assets when they are tokenized.

Know your carton?

To illustrate how important this is, let’s come back to the question of how companies will do business with each other on public blockchain networks: The exchange of product or asset tokens for money tokens. Once a company starts to tokenize its inventories and assets and use those in contracts and financial services, they are disintermediating traditional financial entities. They are also, consequently, taking on some of the regulatory responsibilities of those intermediaries.

Tokens, if they have value, can be moved around as easily as money, for example. While a consumer packaged goods (CPG) company may never have had cause to think about this before, once they tokenize packages of detergent, those tokens have an effective exchange rate with real money and other goods that makes them perfectly suitable for any kind of deal, legal and otherwise. That means even CPG companies will become responsible for know-your-customer (KYC) and anti-money-laundering (AML) compliance.

Is this a deal-breaker for public networks and enterprises? No, it isn’t.

One of the great benefits of smart contracts and blockchain tokens is that they are programmable. Going forward, audit, KYC and AML regulations can and will be written into smart contracts and tokens. Combined with exchange controls and other checks, it will be possible to control how and when tokens are used on public blockchains without resorting to the centralization of the blockchain as a whole. This will even include canceling and issuing new tokens to handle theft and loss.

There are, no doubt, many who will mourn the end of public blockchains as systems wholly outside of regulatory control. For blockchains to deliver on their promise, this is inevitable, but how this happens matters a great deal.

If regulatory compliance is delivered through centralization, then there will be a great loss to innovation and we may see the dream of a re-decentralized internet die. I didn’t call my original paper on blockchain technology “Device democracy” for nothing. It’s my dream, too.

There is another option, however: regulatory compliance within a decentralized framework. An opt-in model based on voluntary agreement to smart contracts means that companies can use blockchains for business without embracing undue risk. But at the same time, individuals and startups can continue to pursue radical experiments without having to ask anyone for permission.

Hardhats image via Shutterstock

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

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Turkish Exchange Develops Blockchain-Based Customer Database

Turkey’s Borsa Istanbul Stock Exchange (BIST) has developed a blockchain-powered customer database, Daily Sabah reported September 6.

Founded in 2013, BIST is the result of the merger of the Istanbul Stock Exchange, the Istanbul Gold Exchange, and the Turkish Derivatives Exchange (TurkDex). Per the exchange’s annual report for 2017, it has 399 listed companies, a market capitalization of around $133 billion, and $1 trillion of total traded value.

The recent development will synchronize the customer databases of Borsa Istanbul, Istanbul Clearing, Settlement and Custody Bank (Takasbank), and the Central Securities Depository of Turkey (MKK).

The new platform, which is “designed under the Know Your Customer concept (KYC),” will manage the addition of new customers, manage documents, and edit information. “If required, the application can be used in other projects too,” BIST reportedly said.

In the beginning of August, Turkey established the country’s first university-level blockchain center, aiming to close the blockchain expertise gap and ensure wide deployment of the technology. The center’s director Bora Erdamar said then that Turkey may have a chance to become a leading country in blockchain technology.

While in recent months Turkey has demonstrated a proactive approach to blockchain adoption, even considering the development of a national digital currency, lawmakers of the state Directorate of Religious Affairs have previously said that Bitcoin (BTC) was “not compatible” with Islam.

Despite the government’s position, cryptocurrency exchanges in Turkey reportedly enjoy the support of most banks, making it easier for new traders to start buying and selling cryptocurrencies.

Interest in cryptocurrency has grown in the country following a nosedive of the national currency, the Turkish lira. In mid-August, local exchanges saw trade volumes spike by as much as 150 percent, as traders tried to protect their fiat savings from devaluation by pouring it into Bitcoin.

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Major Chinese Insurance Firm to Apply Blockchain Technology via New Partnership

Major insurance firm the People’s Insurance Company of China (PICC) will apply blockchain technology to its operations via a new partnership, according to a September 1 press release.

PICC has partnered with blockchain platform VeChain, and a global quality assurance and risk management company DNV GL to make their business more time and cost efficient. Additionally, the new partnership intends to improve fraud prevention, Know your Customer (KYC) compliance, as well as the claims experience.

In the announcement, PICC says that blockchain technology will bring digital transformation to the insurance industry, which will reportedly create an “instant compensation” for companies by offering a more profitable business model.

Specifically, the VeChainThor Platform will assist PICC with expanded data management and more effective data processing, while DNV GL will guarantee the insurance system’s data integrity as an independent third-party assurer.

Other insurance organizations worldwide have begun adopting blockchain technology. In August, the American Association of Insurance Services (AAIS) introduced the “first secure, open blockchain platform” for managing the collection of statistical data by insurance carriers, regulators, as well as other participating contributors.

In April, global insurance brokerage and risk management firm Marsh announced the first commercial blockchain service for proof of insurance in order to switch their system “from complicated and manual to streamlined and transparent.”

VeChain, which is headquartered in Shanghai, is reportedly the first blockchain firm to launch cooperation with Chinese government. VeChain’s token VET was launched in 2015, and is currently the 17th top cryptocurrency by market capitalization, trading at $0.0189 with a market cap of around $1 billion at press time.

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There's a Huge Opportunity for Everyone in Crypto, It's Called KYC/AML

Bruce Silcoff is the CEO of Shyft in Toronto, which is focused on developing blockchain-based solutions for digital identity and KYC/AML processes.


It’s easy to question the need for strict know-your-customer (KYC) and anti-money-laundering (AML) controls, as Edan Yago did in a recent CoinDesk op-ed.

Who likes the rising complexity and costs of compliance? Who gets excited about relinquishing control of personal data to set up a wallet, let alone access basic financial services?

The resulting data duplication across multiple centralized, siloed databases raises the risk profile for organizations large and small, stifling basic operations and thrilling and delighting no one.

KYC/AML is an easy target for critics like Yago, who also argue that these practices effectively amount to global surveillance, and therefore stand in direct contradiction to two of the most important aspects of cryptocurrency — privacy and disintermediation. Not only can KYC/AML infringe on a user’s right to privacy, we are told, but it can see sweeping “Big Brother” surveillance practices instituted. Over and out.

Should we do away with regulation then? Down with KYC/AML? Not so fast.

We’ve seen the alternative to no regulation firsthand, and what that means for blockchain companies. Silk Road aftershocks slowed down innovation and effectively de-legitimized the space for years, because blockchain came to be associated with criminal activity. Regulatory uncertainty meant that for years, early adopters took enormous personal and financial risks to pave the roads we get to travel on today.

Even more importantly, if none of us show up to sit at the table when it matters most – when the future of the ecosystem is at stake, because, no doubt, more regulations are coming – we will have only ourselves to blame if we don’t like the results.

A new privacy standard

It’s important to note that although KYC/AML processes and regulations can hinder privacy, that doesn’t mean that they must.

There is no reason that approaches more consistent with the fundamental principles of cryptocurrencies can’t be devised to satisfy KYC requirements without placing too much data in the hands of a central provider (or a handful of providers) who could abuse it, or open it up to abuse through a catastrophic breach.

In fact, KYC practices are fast becoming the gold standard for regulatory bodies looking to thwart money laundering in the cryptocurrency ecosystem.

It’s incumbent upon the cryptocurrency ecosystem to develop solutions that carry out these practices in a manner that doesn’t kill the technology’s promise.

Mass adoption

If our common goal is to advance mass adoption, blockchain and crypto companies should be prepared to work closely with the regulators and come up with new ways to solve big thorny problems. Simply put, we must build better technology.

Blockchain and strong cryptography enable multi-stakeholder use cases that simply weren’t technologically possible even a few years ago, and KYC/AML presents new exciting opportunities to revisit and uphold the original intent to curb bad actors and improve the protocol.

At present, the KYC/AML infrastructure mirrors guidelines implemented by centralized financial enterprises around the world. Just as traditional financial institutions require due diligence on prospective customers, cryptocurrency companies also rely on KYC/AML to collect personally identifiable information on individuals before allowing them to create new crypto wallets, do peer-to-peer lending, remit money across borders, or buy or sell crypto on an exchange. In the event a crime is committed, this information can be used to accurately pinpoint an offender and take appropriate action where necessary.

However, identity verification shouldn’t come with the risk of data compromise and extreme costs.

Through strong cryptography and through introducing decentralization into the current system and process, it’s possible to create protocol-level crypto rails to dramatically improve the handling of KYC/AML from the privacy and security perspective — all while reducing the cost of verification and clearing the barriers to mass adoption of cryptocurrencies and blockchain.

Financial inclusion

Once the costs are dramatically reduced, the upside of having strong and efficient KYC/AML regulations in place means more businesses will innovate and prosper. Progressive jurisdictions like Bermuda, Mauritius and Australia are already taking note and turning to the blockchain and crypto space for collaboration on legislation.

This levels the playing field for those billions of people without “legal ID” in a traditional sense, because new methods emerge to help assess people’s ability to repay loans, prove their credibility, transact and participate in the global economy. Traditional banking becomes a viable option then, as do the alternatives because there are new ways to transact and establish trust that don’t involve relinquishing full control of personal data. Finally, if the costs of KYC/AML compliance keep that global economic participation at bay, once that barrier is gone, imagine the freedom for innovators it would create.

This is why my team and other notable organizations are working to showcase the importance of KYC/AML and other important initiatives in the global cryptocurrency community — to prove, through tangible use cases, that it’s not preventing crypto innovation, it’s pioneering it.

Image via Unsplash.

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

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Coinbase to Pursue Decentralized Form of Identification Following Acquisition

Cryptocurrency exchange and wallet service Coinbase has acquired San Francisco-based startup Distributed Systems Inc., which works on decentralized identity solutions, according to an August 15 announcement.

In the blog post, B Byrne, project manager for Identity at Coinbase, said Distributed Systems will help the exchange work on new ways to validate and verify identity within its plans to develop an open financial system. The blog post says:

Blockchain technology that powers cryptocurrencies offers a new way to let us all be “verified” everywhere we go on the internet, feeling safer about our interactions with others and opening the door to the experiences that require trust.”

In the blog post, Byrne describes a type of identity wherein users retain control over their private information, without having to give a copy away. Citing the example of a Social Security Number, Byrne says that every time one is asked to provide it, the recipient now has a version of that information, which “has exactly the same power as the original.”

With the new acquisition, Byrne says Coinbase will work toward a decentralized identity that will “let you prove that you own an identity, or that you have a relationship with the Social Security Administration, without making a copy of that identity.”

Byrne further stated that Coinbase needs to be “deliberate about how and where we apply this technology,” considering anonymity, privacy, and other sensitive data issues.

According to TechCrunch, Distributed Systems was incorporated in 2015 with a focus on developing an identity standard for dApps called the Clear Protocol. Last year, the startup reportedly raised a $1.7 million seed round led by venture capital fund Floodgate.

The company was considering raising a $4 million to $8 million round this summer, but the team began negotiations about investment with Coinbase, which resulted in the acquisition.

Coinbase has previously acquired companies in order to expand its services. In June, the exchange acquired securities dealer Keystone Capital Corp. in addition to Venovate Marketplace, Inc., and Digital Wealth LLC in order to become a fully regulated broker dealer with the U.S. Securities and Exchange Commission. The acquisition could help Coinbase extend its offerings and subsequently expand into non-crypto financial products.