Weekly Blockchain & Crypto Digest | Week 17

Quick Intro

Every week on Saturday I am publishing a Weekly Blockchain & Crypto Digest, where I am covering the hottest stories that happened in the cryptocurrency space over the week, what I have read and what you should not miss too.

If you are as passionate and curious about crypto as I am and always want to stay updated, hit the follow button and let's learn & grown together.

This was another interesting week in crypto, and these were the hottest stories.

JPMorgan Chase to Add New Features to Blockchain-Powered Network for Global Banks

JPMorgan Chase (JPM) is expanding the use of its blockchain technology to help reduce the number of global payments rejected by errors, the Financial Times reported on April 21.

The United States financial giant is adding new features to its Interbank Information Network (IIN), which is now used by more than 220 banks around the world. The technology was originally designed to help institutions share payments data in real time — cutting delays in processing times.

John Hunter, JPM’s Head of Global Clearing, said it has built a new feature that can instantly verify whether a payment is heading to a valid bank account. At present, transactions can be rejected days after they were sent because of typos in sort codes, account numbers and addresses. He told the FT:

Banks straight through processing rates are in the mid-80s to mid-90s. It’s that gap — the 5 to 20 percent of payments — that have to be assessed by operations where we’re trying to alleviate some of that pain.

The new feature is going to be live by the fall, and while the IIN is currently free to use, the report revealed subscriptions may be introduced over time.

Meanwhile, JPM is also trying to attract FinTech to its network by enabling them to develop applications in a specially created sandbox where they can gain access to data modeling, file transfers and secure messaging. Hunter told the newspaper that this could remove many hurdles for startups, adding: “Developers only need to bring their intellect.”

JPM first launched IIN as a pilot scheme in 2017. Experts at the financial institution believe the technology will provide benefits to banks and financial systems.

In February, the banking giant announced it was launching its own cryptocurrency, dubbed the “JPM Coin,” to increase settlement efficiency. Later that month, CEO Jamie Dimon suggested that the coin could evolve to have a consumer use.

If you want to learn more about the latter, I kindly invite you to read my earlier take titled April Fool's Came Early this Year, or Why JPM Coin is a Joke.

Robinhood Applies for Charter in Push to Offer Traditional Banking Services

Stock and crypto trading platform Robinhood has applied for a bank charter with regulators in the United States. Robinhood says securing approval from the Office of the Comptroller of the Currency would be a first step towards being able to offer traditional banking products and services.

Any full-service bank would likely operate together with its mobile-focused trading arm, which enables users to trade cryptocurrencies, funds and options on their phones and desktops. Last year, it was estimated that 5 million users were trading crypto on the platform.

In December, Robinhood was forced to make a U-turn on plans to offer a checkings and savings service to U.S. consumers. The company had claimed customer deposits of up to $250,000 would be insured by the non-profit Securities Investor Protection Corporation, but it later emerged that the entity only guaranteed funds for purchasing securities.

Robinhood faced scrutiny after it then rebranded the service’s name to “cash management” and removed references to deposit protection. According to Reuters, U.S. politicians subsequently accused the company of failing to offer full transparency to the 850,000 consumers who had expressed an interest in the service.

Societe Generale Subsidiary Issues 100M Euro Bond on Ethereum

French specialized credit institution Societe Generale SFH issued a 100 million euro ($112 million) bond as a security token on the Ethereum (ETH) blockchain.

Societe Generale SFH — which is a subsidiary of one of Europe's largest financial services groups, Societe Generale Group — has rolled out its first pilot project developed in collaboration with Societe Generale FORGE. The latter is an internal startup launched through the Group’s intrapreneurial program, the Internal Startup Call.

The transaction’s goal was to investigate a more efficient way for bond issuance, which would potentially facilitate improved transparency, and quicker transferability and settlement. The company says in the announcement that the product “proposes a new standard for issuances and secondary market bond trading and reduces cost and the number of intermediaries.”

Last September, Societe Generale became one of the major financial organizations that launched a joint venture dubbed komgo SA to oversee a new blockchain-based platform for financing the trading of commodities.

The venture aims to digitize trade and commodities finance processes through a blockchain-based open platform, and was developed in partnership with the Ethereum-focused blockchain infrastructure and solutions group ConsenSys.

Earlier in April, Private bank Kleinwort Hambros, which is owned by Societe Generale, launched an exchange-traded note made up of blockchain-related companies. The stocks reportedly included 20 companies, which are expected to profit from blockchain and distributed ledger technology adoption.

Bitfury Institutional Bitcoin Mining Fund Gains EU Regulator Approval

Blockchain tech giant Bitfury has partnered with a Swiss investment firm to release a dedicated bitcoin mining fund for institutional investors.

Bitfury, which develops various blockchain-related software along with mining services, confirmed that Final Frontier, in which it holds a minority stake, had gained regulatory approval for the fund from neighboring Liechtenstein.

Focusing on institutions, the fund will give major investors access to the world of bitcoin mining, with Bitfury describing its creation as beneficial for the emerging sector.

Bitfury will provide the hardware for the project, which will also leverage the company’s various mining centers to source power and deliver favorable mining costs.

SBI Group Invests $15M in ‘Smart Card’ Wallet Manufacturer

‘Smart card’ crypto wallet manufacturer Tangem has received a $15 million investment from major Japanese financial services firm SBI Group. The new investment will purportedly allow Tangem to relocate its headquarters to the ‘Crypto Valley’ of Zug, Switzerland.

From Zug, Tangem want to develop new use cases for its physical smart cards that function like the hardware wallet version of banknotes. Each of these smart cards carries a fixed amount of cryptocurrency. The company intends for these smart cards to be used for daily crypto payments. 

The startup was co-founded by the former head of UBS's Moscow branch, Anselm Schmucki, and claims to combine Swiss financial know-how with Russian IT expertise. Under the leadership of CEO Andrey Kurennykh, the company employs 13 people in Switzerland, Russia, Singapore and Hong Kong.

Currently, the startup is working on the application of Tangem notes, and has produced and sold over 25,000 wallets for individuals and companies such as Cardano and RSK.

Bitfinex Allegedly Covers $850M Loss With Tether Funds

The New York Attorney General’s office has alleged that crypto exchange Bitfinex lost $850 million and subsequently used funds from affiliated stablecoin operator Tether to secretly cover the shortfall.

Attorney General Letitia James revealed that her office obtained a court filing alleging that iFinex Inc. — the operator of Bitfinex — Tether Limited, and their associated entities were in violation of New York law in connection with activities that may have defrauded New York-based crypto investors. James stated:

Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million dollars of co-mingled client and corporate funds. New York state has led the way in requiring virtual currency businesses to operate according to the law. And we will continue to stand-up for investors and seek justice on their behalf when misled or cheated by any of these companies.

According to the filings, Bitfinex never revealed the loss to investors, with executives of the exchange and Tether engaged in a series of conflicting corporate transactions where Bitfinex got access to up to $900 million of Tether’s cash reserves. Bitfinex allegedly took not less than $700 million from Tether’s reserves and used the funds to hide losses and inability to handle clients’ withdrawals.

The court has reportedly ordered the operators of the companies to immediately cease the dissipation of the United States dollars that back tether tokens and to produce investigation-related information and documents. The ruling also prohibits the companies from destroying potentially related documents.

Furthermore, the Attorney General is seeking an injunction to compel Bitfinex and Tether to continue trading, so as not to harm customers.

Tether previously faced controversy after critics suspected the coin of operating a fractional reserve while issuing more tokens than they had backing for, and sending them to Bitfinex cryptocurrency exchange. Following a subpoena from U.S. regulators to both Bitfinex and Tether, the company ordered an unofficial audit, which found that stablecoin had the appropriate amount of backing dollars.

Read more about this in my earlier take ?? All You Need to Know about Tether.

Follow my Weekly FinTech Digest if you haven't yet! There I'm covering the hottest stories and latest development in the FinTech space.

P.S. You might enjoy my earlier pieces as well:

?? Month in Blockchain & Crypto | March 2019

?? Month in FinTech | March 2019

?? Lithuania's 10 Years Challenge - from Developing Country to European FinTech Hub

?? Bitcoin is NOT a Currency, and Never Will Be

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About: I am a business developer, sales professional, FinTech strategist, as well as Cryptocurrency and Blockchain enthusiast. I'm highly passionate about Financial Technology and Digital Innovation, and strongly believe that it will change the world for the better. Apart from my daily job at one of the leading alternative banking and payments providers in EEA, I'm an active member of FinTech community and a TechFin evangelist.

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