Norway Central Bank Considers Developing Digital Currency

Norway’s central bank considers introducing its own cryptocurrency to “ensure confidence in money and the monetary system.”

Norway’s central bank, Norges Bank, is considering developing its own digital currency as a supplement to cash to “ensure confidence in money and the monetary system”, according to a working paper May 18.

The report, prepared by a Norges Bank working group, investigates aspects they believe should be considered when assessing the issuance of a central bank digital currency (CBDC). The authors emphasize at least three possible CDBC applications: the introduction of a reliable alternative to deposits in private banks, a suitable legal tender as a supplement to cash, and an independent backup solution for electronic payment systems. Norges Bank Governor Øystein Olsen wrote:

“A decline in cash usage has prompted us to think about whether at some future date a number of new attributes that are important for ensuring an efficient and robust payment system and confidence in the monetary system will be needed.”

The report states that a CBDC could provide customers with an alternative means to store assets. According to Norges bank, the foundation of a CBDC must also not interfere with the ability of the bank and other financial institutions to provide credit. Norges Bank will reportedly continue to issue cash as long as there is demand for it. The working group has only completed the initial phase of studying a potential CBDC, stating:

“It is too early to conclude whether Norges Bank should take the initiative in introducing a CBDC. The impacts of a CBDC – and the socio-economic cost-benefit analysis – will depend on the specific design. The design, in turn, will depend on the purpose of introducing a CBDC.”

Other countries in Europe have also begun to consider issuing a digital currency through their central bank. Similar to Norway, Sweden’s Riksbank is considering an e-krona as a result of declining cash circulation.

Yesterday, Cointelegraph reported that the Swiss Federal Council has requested a study on a state-backed digital currency examining the risks and opportunities of its introduction. Now, the lower house of the Swiss parliament has to decide whether to support the Federal Council’s request for research. Should the proposal be approved, the Swiss Finance Ministry will conduct the study.

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Iran and Russia Discuss Transacting in Crypto to Avoid International Sanctions

Both Iran and Russia are reportedly looking into using cryptocurrency as a way around Western sanctions

Iran and Russia could start using cryptocurrencies to avoid Western sanctions, Russian news portal RBC reported yesterday, May 17.

Mohammad Reza Pourebrahimi, the head of the Iranian Parliamentary Commission for Economic Affairs, referred to cryptocurrencies as a promising way for both countries to avoid US dollar transactions, as well as a possible replacement of the SWIFT interbank payment system.

At a meeting with Dmitry Mezentsev, the Chair of the Federation Council Committee on Economic Policy, Pourebrahimi said that they have “engaged the Central Bank of Iran to start developing proposals for the use of cryptocurrency.”

Pourebrahimi added that he discussed this topic in the State Duma’s Committee on Economic Policy the day before and that Iran had established cooperation with Russia on this issue:

“They [Russia] share our opinion. We said that if we manage to move this work forward, then we will be the first countries that use cryptocurrency in the exchange of goods.”

In turn, Mezentsev noted that “interbank relations between our countries should be of great importance” against the backdrop of international sanctions currently in place against both Russia and Iran. The meeting of the interbank working group on financial and interbank cooperation will be held in Tehran on July 5 of this year, RBC reports.

Last week, Pourebrahimi had reported that without access to the international banking system, Iranian citizens have so far succeeded in siphoning a staggering $2.5 bln out of the country in crypto.

Venezuela, another country facing international sanctions, recently released its own oil-backed cryptocurrency, the Petro, in a move that some critics saw as an illegal way to enter the international financial markets. After the Petro’s launch, both Turkey and Iran had expressed interest in releasing their own state-backed cryptocurrencies as well, with Russia’s own CryptoRuble reportedly set to launch in mid-2019.

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India: Seven Major Banks Begin Testing Blockchain Trade Finance Platform

A new blockchain trade finance and supply chain test is underway involving big banks in India, led by IT multinational InfoSys.

Seven of India’s largest banks have joined a Blockchain-powered trade finance initiative led by Indian IT giant InfoSys, a press release announced May 16.

The collective, known as India Trade Connect, includes institutions such as Axis Bank, ICICI and South Indian Bank. It was reportedly formed to conduct testing of InfoSys’ Finacle Trade Connect, a blockchain platform designed to “address the trade finance process requirements of banks.”

Finance Trade Connect meanwhile already contains its fair share of bullish sentiment from participants. “We believe, this will enable automation, increase transparency as well as enhance efficiency across trade and supply chain operations,” ICICI senior general manage Ajay Gupta commented, adding:

“With more organisations adopting the blockchain technology, it holds immense potential to offer a seamless network for all stakeholders on a single platform.”

According to the press release, testing by the seven Indian banking institutions is already underway.

Multiple efforts are attempting to improve the areas of trade finance and supply chain in modern banking in 2018. Earlier this week, Cointelegraph reported that UK-based banking giant HSBC completed the world’s first ever blockchain-powered trade finance transaction, shipping soybeans from Argentina to Malaysia.

In India, ICICI’s own blockchain initiative for domestic and international trade finance transactions attracted 250 corporates, it disclosed last month.

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JPMorgan Creates and Fills New Position of Head of Crypto Assets Strategy

JPMorgan creates and fills new position of head of crypto assets strategy, post will identify and lead new crypto projects at bank.

Leading US banking group and financial services firm JPMorgan Chase has recently created and filled the new position of head of crypto-assets strategy, Business Insider reported today, May 17.

London-based Oliver Harris, 29, will take the new role, reporting to the head of blockchain development, Umar Farooq. Harris will also lead JPMorgan’s internal blockchain project Quorum, which began testing by JP Morgan Chase and the National Bank of Canada last month.

According to Business Insider, Harris will be identifying and leading new crypto projects for the bank, rather than actively trading in cryptocurrencies. He will reportedly investigate crypto custody services and how blockchain could work in JPMorgan’s payments business.  

For the last two years, Harris has been leading JPMorgan’s In Residence program, which identifies and partners with fintech startups that the bank finds promising.

Daniel Pinto, co-president of JPMorgan, has recently taken a positive stance on cryptocurrencies in an interview with CNBC, claiming that the “tokenization” of the financial system is “real”, with “many central banks looking into” it. However, Pinto stressed that crypto adoption is not possible in its “current form”.

In general, the investment banking giant has been skeptical of cryptocurrencies. JPMorgan banned its customers from crypto purchases with credit cards back in February, in addition to including cryptocurrencies to the “Risk Factor” section of its 2017 annual report to the US Securities and Exchange Commission (SEC).

Last year, JPMorgan’s Chairman & CEO Jamie Dimon called Bitcoin (BTC) a “fraud” and claimed that he would fire any employee trading BTC on the company’s accounts. Dimon soon reversed his position in January, admitting that he regretted his earlier statements and adopting a lukewarm stance toward crypto. Dimon said he is, “not interested that much in [crypto] at all.”

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JP Morgan Announces Prototype Blockchain Platform to Streamline Capital Markets Infrastructure

J.P. Morgan Chase & Co demonstrated a prototype of its blockchain platform for capital markets at the NY Consensus conference yesterday.

J.P. Morgan Chase & Co presented a prototype of its blockchain platform for capital markets, which aims to cut costs and enable smoother securities transactions. The announcement took place at NY’s Consensus conference Wednesday, the Wall Street Journal reported May 16.

Christine Moy, executive director of J.P. Morgan’s Blockchain Center of Excellence, told WSJ that blockchain “has the potential to be transformative” for the capital markets infrastructure.

She explained that capital markets – in which vast amounts of capital are transacted – involve multiple systems and information flows between many different stakeholders, “from issuers and asset managers to clearing houses and fund administrators.” “The promise of natively issuing financial instruments on blockchain is that you can share that infrastructure,” she said.  

Moy told the WSJ that a blockchain could offer a single, streamlined application, which each of the multiple entities could share and participate in. This could bring significant cost savings, she suggested, as well as overcoming issues of trust between parties.

J.P. Morgan – alongside Santander and other major banks and tech industry players – is part of the Enterprise Ethereum Alliance, a nonprofit that focuses on enabling interoperability between Ethereum blockchain applications, as well as improving their privacy, scalability, and security.

As Cointelegraph reported earlier this month, JPMorgan is working on blockchain integration to rehaul its payment, clearing and settlement systems, recently filing a patent for real-time p2p intra- and interbank transfers based on the technology.

Just yesterday, JPMorgan co-president Daniel Pinto confirmed that the bank is “looking into” the crypto space, saying he had “no doubt” the technology would “play a role” in the bank’s future. He suggested the “tokenization” of the traditional financial sector would, however, likely see new iterations, saying that, for him:

“Cryptocurrencies are real but not in the[ir] current form.”

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Bitcoin Mining Manufacturer Canaan Confirms IPO Filing, Backed by Major Banks

Canaan Creative is pushing ahead with its IPO, which could raise $1bln, reports announced this week.

Chinese Bitcoin mining hardware manufacturer Canaan Creative plans to start trading of its IPO as soon as July, Bloomberg reports May 16.

Canaan, which confirmed rumors it was planning an IPO with a filing this week, will likely create the largest Bitcoin-focused offering yet seen when it debuts on the Hong Kong stock exchange.

Citing anonymous sources, Bloomberg added that while the filing did not mention a specific fundraising target, the figure “could” circle $1bln – a figure which had previously appeared earlier this month.

The move would create further competition for mining stalwart Bitmain, with Canaan currently already controlling around 15% of the Bitcoin chips and hardware equipment market.

In an interview with Reuters last month, meanwhile, co-chairman Jianping Kong said the numbers were equal to “a quarter of the world’s bitcoin blockchain computing power.”

Major IPO backers appearing on the filing are Morgan Stanley, Deutsche Bank AG, Credit Suisse Group AG and CMB International Capital Ltd.

Canaan has yet to issue a public statement about the move, declining comment after a request from Reuters Tuesday.

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Japan: Nomura Bank Announces Crypto Custody Solution For Institutional Investors

Japan-based global investment bank Nomura has announced a joint venture to establish a custody offering for digital assets.

Japan-based global investment bank Nomura has announced a venture to establish a custody offering for digital assets, Cointelegraph Japan reports today, May 16. The new project aims at removing barriers to institutional investment in the crypto space.

Nomura’s joint venture will be conducted in partnership with digital asset security company Ledger and investment house Global Advisors, according to reports.

The partners allege that a shortage of robust and legally regulated “safekeeping solutions” is currently preventing traditional asset managers from building investment vehicles in the crypto ecosystem, emphasizing that overcoming custody and security obstacles is crucial given that “one in five finance firms are [allegedly] considering launching digital asset trading and investment businesses in the coming year.”

The new digital asset custody venture is dubbed “Komainu,” and will provide infrastructure and an operational framework for institutional investors to integrate their traditional investment vehicles into the “frontier” crypto industry.

Just yesterday, major US crypto wallet provider and exchange service Coinbase announced its own custodian solution to address security and regulatory compliance concerns, with Coinbase VP Adam White saying that the product could “unlock $10 bln of institutional investor money sitting on the sideline.”

Earlier this month, New York Stock Exchange owner ICE revealed its own plans to offer crypto swap contracts that would be settled in BTC, suggesting it too has come up with an SEC-compliant custody solution for institutional holders.

The narrative that custody and regulatory obstacles are the last remaining obstacle for the crypto market to “mature” and draw major institutional investment is widely shared, and led CNBC’s Robert Kelly to suggest recently that cryptocurrencies now “look to be becoming an emergent asset class,” with custody solutions a significant milestone that could soon herald widespread crypto adoption in the traditional financial sector.

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European Central Bank’s Mersch Says Banks Should ‘Segregate’ Crypto Trading

The European Central Bank’s Yves Mersch stated that banks should “segregate” their dealings in cryptocurrencies from other activities, saying crypto doesn’t “qualify” as money

European Central Bank (ECB) board member Yves Mersch has said that banks should “segregate” their dealings in cryptocurrencies from other activities, Reuters reported May 14.

Reuters quotes Mersch as raising concerns over the high volatility of crypto markets, emphasizing that digital tokens “do not qualify as money,” and that their issuers, as well as dealers, exchanges, banks, or clearing houses, should be regulated.

Mersch reportedly noted that even at its peak market capitalization in January 2018 –  which Mersch mistakenly reports as $432 bln rather than the actual $800 bln – the crypto market is still too small to threaten financial stability. He said however that if cryptocurrencies were to be used as collateral for bank loans or for settling trades at clearing houses, there would be an argument for such activities being “ring-fenced” from other trading and investments.

As Reuters notes, the European banks regulated by ECB are not currently dealing in crypto. In the US, investment banking giant Goldman Sachs recently announced it would be opening a crypto trading desk “within weeks.”

ECB’s Yves Mersch has been a staunch critic of the increasing interconnection of the traditional financial sector with the cryptocurrency space, saying that cryptocurrencies pose a risk of “contagion and contamination of the existing financial system” in February this year.

Notwithstanding Mersch’s concerns – that are shared by others such as the Bank of International Settlements’ (BIS) Augustín Carstens – the ECB’s Chair of the Supervisory Board Daniele Nouy told CNBC in February that future involvement of the ECB in cryptocurrency regulation was likely to be “very, very low”.

In March, ECB and BIS issued a statement on Bitcoin, as well as central bank-issued digital currencies (CBDCs), saying they are “not the answer to the cashless economy.”

ECB has however championed blockchain’s potential for transforming securities settlements, against the backdrop of the European Commission’s Blockchain Observatory, which aims at “uniting” the European economy around the technology.

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World’s Fifth Largest Bank To Trial Own Cryptocurrency In 2019, Report Says

Mitsubishi UFJ Financial Group is planning a 100,000-user trial of its new cryptocurrency, local sources report.

The banking unit of Japan’s Mitsubishi UFJ Financial Group (MUFG) plans to trial its own cryptocurrency as early as 2019, Cointelegraph Japan reports today, May 15.

Cointelegraph Japan quotes local news media outlet NHK saying that a test phase of the cryptocurrency, known as MUFG Coin, could involve around 100,000 account holders.

Currently the fifth largest bank in the world by assets, MUFG originally signalled its intention to launch a token in January this year, in so doing becoming the first Japanese bank to issue one. Plans for the move stretch back further to 2016, Cointelegraph reported at the time.

MUFG Coin is designed to offer currency functionality first and foremost, with test customers to download an app that will automatically convert their deposits. According to NHK’s report, one MUFG will be equal in value to one yen.

According to NHK, users “will be able to use the currency to make payments at places like restaurants, convenience stores and other shops,” as well as “transfer the currency to the accounts of other participants.”

The bank joins a steadily increasing swathe of major Japanese entities preparing inroads into the cryptocurrency industry. The exchange sector has dominated the headlines in 2018, with names such as DMM and Yahoo! at various stages of involvement.

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Taiwan: Taipei Bank Launches First Blockchain Payment System In The Country

Taiwanese Taipei Fubon Bank has reportedly become the first bank in the country to deploy a blockchain payment system.

Privately-held Taipei Fubon Commercial Bank has reportedly become the first bank in Taiwan to deploy a blockchain-based payment system, local media Taipei Times reports May 14.

The bank announced that it deployed its blockchain-based payment system for restaurants and merchants near the National Chengchi University. Taipei Fubon Bank first revealed its plans to introduce a blockchain-based payment network in March 2017 when it signed a contract with the university to carry out “key technology and engineering R&D for [a] blockchain payment network.”

Running on the Ethereum (ETH) network, the blockchain-powered payment application implements the Istanbul Byzantine Fault Tolerant (BFT) consensus protocol, which reduces payment times, as well as saves on the cost of transactions. According to the bank, the algorithm has cut transaction times to less than one second.

The newly-launched blockchain deployment also provides an improved method of recording data transactions. Each transaction is instantly encrypted and recorded on the blockchain, and merchants will be able to query complete transaction records through the blockchain account book.

According to Taipei Fubon Commercial Bank, the transaction volume of cooperative merchants in the zone near the university has quadrupled over the two-week period following the launch. Taipei Fubon Bank states that the next stage in the project’s development is to expand the blockchain-powered payment system to stores and businesses across the Chengchi area, creating a demonstration zone for the new application.

In January, Taipei announced that they intend to turn into a ”smart city,” using blockchain to provide technological advances like pollution sensors and health history tracking to citizens. In February, the governor of Taiwan’s central bank Yang Chin-long stated that the bank is exploring blockchain applications to improve “the security and efficiency of payment systems.”

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