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A Glimpse of Banking’s Future, Live on the Ethereum Blockchain

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Michael J. Casey is the chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative.

The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday exclusively to our subscribers.


At first glance, this week’s move by the investment bank Societe Generale to issue a security token-like bond in which it was both the issuer and the sole investor might seem like a pointless act. Not so much a peer-to-peer transaction; just a peer transaction.

But one element of the announcement suggests this was actually an important step in financial institutions’ sometimes fractious relationship with cryptocurrencies and blockchain technology. You see, Societe Generale’s $112 million bond issue used smart contracts built not a private, permissioned blockchain but on the public, permissionless ethereum blockchain.

This was a baby step, for sure. But, let’s remember that this French bank belongs to an industry whose member institutions repeatedly posit that permissionless blockchains are unworkable for them.

Banks have made various arguments for why they feel compelled to use private, permissioned versions of this technology: because they are beholden to know-your-customer and other compliance rules that aren’t easily enforced in a permissionless environment; because their competitive interests require a level of privacy that can’t be assured in a transparent, public setting; or because public blockchain’s probability-based standard for confirming trade settlement falls short of what Wall Street’s lawyers call “settlement finality.”

Yet here was the 19th-largest bank in the world experimenting with the public model.

It would be way too premature to say that Societe Generale has discounted those industry concerns about permissionless blockchains – concerns that are more likely founded on fears of the threat to existing business models than anything else. But the French bank’s move could also signal an acknowledgment that banks’ can’t afford to turn their back on the disruptive threats and opportunities posed by permissionless protocols such as bitcoin or ethereum.

Societe Generale appears to be placing a side bet that the future evolution of digital finance will play out much as the battle for supremacy in next-generation communications technology did in the 1990s – lest it be left on the wrong side of history.

A bet that open systems win

At the end of the nineties, it had become clear that the public, open, interoperable Internet had beaten out private, closed, walled-garden Intranets such as Prodigy, AOL and France’s Minitel to define the new architecture for worldwide information-sharing. It has since become accepted wisdom that the Internet’s open, global system proved superior because it imposed no limit on network size or on the breadth of potential connectivity and because “permissionless innovation” enabled a global developer talent pool of unlimited size and collective brainpower.

It’s reasonable to assume, though by no means guaranteed, that history will repeat itself with the struggle over the future of financial systems. Yes, the unique sensitivities and regulatory framework surrounding finance creates a substantial barrier to entry that protects incumbent institution, those for whom closed, walled-garden approaches protect their competitive positions.

But at the end of the day, money is just information. Communities will tend toward free and open systems for using it.

Is that what Societe Generale is betting on? Perhaps. While the deal was an entirely in-house affair, the bank did make the bond’s terms pari passu with its other covered bonds, a category of debt that securitized by specific balance sheet assets. That means that future owners, whoever they may be, would have equal ranking and risk exposure as any investors in Societe Generale’s more conventional bond issues. And with a five-year maturity, there is ample time for the bank to take the more radical step of seeking outside buyers in a secondary market sale once it has a blessing from regulators.

Also important was the fact that rating agency Moody’s said it considers the use of blockchain technology “credit positive” in this case, in part because of increased transparency and a reduced likelihood of errors “arising from the complexity and the number of intermediaries involved in issuing covered bonds using traditional means.”

This positive assessment points to the generalized potential of security token offerings, or STOs, as a way to more efficiently issue, manage and trade traditional assets such as stocks, bonds, real estate and commodities.

Disruption to come

STOs aren’t as radical an idea as Initial Coin Offerings, or ICOs, which have fallen out of favor with investors following the collapse of the crypto-token market last year and as regulators have threatened actions against the many that have the characteristics of unregistered securities.

Whereas ICO issuers sought to avoid securities registration requirements by describing their “utility tokens” as an integral, commodity-like component of the decentralized networks they were building – a product, not a speculative investment — STOs are simpler and more straightforward. They represent a tokenized claim on some form of real-world asset, and they are deliberately intended to be treated as a security for compliance purposes.

Nonetheless, STOs still promise to be extremely disruptive to capital markets, with a big impact on investment banks such as Societe Generale.

STO-serving smart contracts could allow for automatic updates of share registries and cap tables with each trade, and enable more direct exchanges between buyers and sellers, with fewer intermediaries. Also, if it’s a permissionless system – if there are no “permissioned” incumbent financial entities functioning as gatekeepers of a private blockchain – there is nothing to stop startup service providers shifting many traditional back-end activities such as underwriting, custody and brokerage over to a decentralized network. These are services that investment banks, for the most part, currently provide.

All of this requires that the tech be sufficiently scalable, of course, and that regulators are happy with the kinds of cryptography-based custodial solutions on which it depends. However, it’s widely believed, by people in both crypto and traditional finance communities, that we will get there.

Seeking to control the process

What’s impressive about Societe Generale’s implicit position, then, is that it seeking to understand and have some control over a technology that will inherently threaten some of its businesses.

In doing so, it may be betting that banks like it will adjust to the new paradigm much as they did in the nineties when online stock trading and electronic marketplaces initially threatened Wall Street’s dominance of the securities industry.

Those systems, which made market prices more transparent, drastically reduced the commissions that investment banks could charge for trading, but they also promoted a surge in volumes that compensated for the tighter margins. In the end, the savviest banks invested in this new trading and matching technology and, in taking charge of its development, managed to retain a dominant position in capital markets.

The death of banks might well be a thing to celebrate in the future. But the reality is that the market will for some time continue to value much of the expertise and market-making power that currently resides on Wall Street, even as it starts to demand that the functional back-end tasks of record-keeping, custody, trade matching and clearing and settlement be handled by smart contracts, digital currencies and distributed networks.

Corporate issuers of STOs will always need to find investors. They’ll also be keen to offload the risk that those investors won’t be found onto someone who’s willing and able to bear it. And they’ll pay a good price for those services. My guess is that this is where banks will continue to be very active.

Those that are out there, experimenting with the most radical, future-facing versions of blockchain and other disruptive technologies will be the most profitable in doing so.

Image Credit: Kiev.Victor / Shutterstock.com (SocGen Headquarters)

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Ripple Offered Multimillion-Dollar XRP Bonuses to Lure Top Tech Talent

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Silicon Valley fintech startup Ripple is going out of its solution to say it didn’t create the cryptocurrency XRP. But that doesn’t imply the corporate doesn’t depend on its huge reserves of the token when relationship potential hires.

One engineer who requested to stay nameless confirmed CoinDesk a recruiting e-mail from past due 2018 that promised an XRP package deal from Ripple of price as much as $three million, along with a beneficiant wage be offering.

According to the corporate’s LinkedIn, Ripple is having a look to rent greater than a dozen engineers and technical mavens, together with a brand new head of engineering for its xCurrent project, which goals to rival the legacy messaging community SWIFT on the heart of the present world bills infrastructure.

Salaries might range in step with seniority, however in response to conversations with two potential recruits, XRP bonuses for engineers normally vary in price from $1 million to $6 million, in step with the corporate’s personal analysis. As of press time, XRP is buying and selling at more or less $0.30 in line with token.

(Ripple declined to touch upon bonus applications, together with whether or not they’re nonetheless being introduced in 2019.)

One former Ripple worker, who requested to stick nameless for worry of prison retribution, instructed CoinDesk he by no means heard of such XRP bonus applications earlier than 2017. However, he additionally famous beneficiant fairness offers are usual in Silicon Valley.

In September 2018, one potential engineering recruit, who requested to stay nameless as a result of he works at an organization that may at some point collaborate with Ripple, instructed CoinDesk that he additionally won an e-mail from Ripple that stood out as it introduced profitable XRP applications, supposedly price $three million to $6 million. Both engineers lately paintings at top-tier tech firms in Silicon Valley, albeit the second one programmer at a crypto corporate (thus the upper be offering).

Additionally, the e-mail claimed the worldwide marketplace cap of “its [Ripple’s] coin” was once price $48 billion. According to CoinMarketCap, at the day the e-mail was once despatched XRP’s world marketplace cap was once nearer to $13.three billion. The potential engineer recruit instructed CoinDesk he discovered this discrepancy alarming.

Speaking to the peculiar bonus providing that stuck his eye, the nameless engineer stated Ripple is “a very unpopular entity in the crypto sphere among technologists,” so he believes the corporate is “forced to go above and beyond to attract engineers” all the way through the endure marketplace.

Bear recruiting

A Ripple consultant instructed CoinDesk the corporate lately employs more or less 90 engineers and generation mavens, with plans to rent “aggressively” in an effort to increase its tool as a carrier providing plus improve RippleInternet cell wallets and payout processes.

This is a part of an ongoing hiring spree. The corporate consultant stated that Ripple added 100 new staff around the corporate in 2018, including:

“We move fast to acquire the best talent out there – especially considering the highly competitive nature of other startups who want to hire similar candidates.”

Former Ripple group liaison Jon Holmquist instructed CoinDesk that developer salaries and reimbursement are ballooning throughout Silicon Valley. As such, Holmquist stated any hiring demanding situations may well be associated with the wider marketplace downturn, no longer Ripple particularly.

“No one wants to join crypto for the first time during a bear market. I think that’s more of an industry-wide problem,” Holmquist stated. “There’s always a shortage of talent.”

The nameless engineer disagreed, making an allowance for the opposite kinds of recruiting emails he automatically receives.

“This is for a devops role, which is generally harder to find, but these are really big numbers,” the nameless engineer stated, regarding each the wage and XRP bonus package deal. “It comes across a little bit desperate.”

Serial entrepreneur Dave Schukin tweeted remaining June that the corporate introduced him greater than $175,000 as a base wage, which seems in step with the opposite be offering shared with CoinDesk.

In phrases of what Ripple is searching for, the corporate consultant stated they’re recruiting tool mavens with Java or C++ language experience and an plentiful dose of teachability.

“We are not necessarily looking for blockchain experts – we can always teach domain-specific expertise,” she stated. “We also think it’s important that our engineers carry themselves with humility and are able to think creatively about how to solve hard problems.”

Ripple image by way of Shutterstock

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John McAfee Living in a Constant State of Paranoia Launches Podcast

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By CCN: Following John McAfee’s triumphant return to Twitter after a brief hiatus, the software mogul and his wife on Tuesday announced a new podcast about life on the run.

McAfee’s Life on the Run

This John McAfee gif illustrates his MBTI

The outspoken bitcoin bull’s DGAF disposition. | Source: Giphy

In their announcement, McAfee and his wife describe living on the run and hiding from the government. The software mogul also informs followers that the couple’s brief social media absence was because of an incoming raid.

Can’t Keep John McAfee Down

The outspoken presidential longshot is also a fugitive who will face arrest upon return to the U.S. But McAfee – a bitcoin perma-bull – refuses to let any government keep him down. Following the couple’s announcement today, McAfee posted characteristic crypto advice on Twitter.

He addressed the bitcoin price, suggesting that people who ask him when bitcoin is trading at $7,900 whether they should wait to buy it sound more ridiculous than he looks while getting his hair processed.

“If you like bitcoin, buy it. Who cares whether it’s at $15 or $1,500 or $10,000. If it’s a good deal, f***ing buy it. End of story.”

He then promised to show everyone his hair after it’s done.

Although McAfee and his wife describe their podcast as a chronicle of the couple’s unconventional lives, one major theme is sure to touch on the benefits of decentralized money. If McAfee holds bitcoin, no matter where he goes, he can always use it. Governments may be able to seize the couple’s house, boat, and bank accounts, but they can’t stop bitcoin. At least not without shutting down the internet. Incidentally, McAfee recently expressed an interest in Dogecoin.

Craig Wright vs. McAfee

McAfee is reasonably popular among crypto proponents. But still, some argue that bitcoin and other cryptocurrencies were not designed to help people circumvent taxes or laws.  Among them is controversial figure Craig Wright.

Wright, who registered a copyright on the Bitcoin white paper this morning, is one of McAfee’s most vocal opponents. Wright will undoubtedly argue that McAfee’s podcast will slow mass adoption and increase the public perception that bitcoin’s primary use is for tax evasion and other nefarious purposes.

McAfee Doesn’t Give a F**k!

For those who might disparage McAfee’s unconventional methods of bitcoin evangelism, the presidential candidate has a message:

“As if I give a flying f**k what you think!”

Controversial, outspoken, and intelligent, John McAfee’s podcast is sure to attract a broad audience. But will the McAfee podcast “highlight” the advantages of a decentralized economy and fuel mass adoption or the opposite? Only time will tell.

Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.

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Binance’s BNB Token Hits All-Time High in Bitcoin Value

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Binance Coin (BNB), the token issued via the arena’s greatest cryptocurrency trade via industry quantity Binance, has prolonged its contemporary positive aspects to set a brand new all-time prime in bitcoin-denominated price.

At press time, BNB is buying and selling at 0.002619 BTC ($9.60) however in the past reached 0.002688 at 10:00 UTC Monday – the cryptocurrency’s easiest worth in its complete one and part 12 months historical past, in keeping with information from Binance. 

Binance first indexed BNB for buying and selling on July 14, 2017, and the token has accomplished a just about 9,600 % go back on funding from its December 2017 initial coin offering (ICO) worth of $0.10.

At the similar time, BNB nonetheless has a long way to move earlier than drawing near it’s all-time prime in USD price. Current figures constitute a decline of 58 % from BNB’s USD prime of $22.48 accomplished on Jan. 12, 2018, information from OnchainFX additional finds.

BNB’s BTC-tied prime got here after a duration of sturdy efficiency that performed out during the last a number of weeks.

As may also be observed within the desk under, BNB has considerably outperformed the marketplace chief and international’s greatest cryptocurrency bitcoin during the last 90-days, together with a 35 % building up previously seven days by myself when bitcoin rose simply five %.

BNB’s contemporary enlargement has catapulted it to transform the arena’s 10th greatest cryptocurrency via marketplace capitalization, which now registers $1.33 billion, in keeping with information from Coinmarketcap.com.

While BNB could also be the one well known cryptocurrency to hit a brand new report of types, it has no longer been the most efficient performer.

Data from OnchainFX finds 3 cryptocurrencies have outshined BNB previously seven days together with ARK, Dentacoin, and Theta Token who’ve published positive aspects of 35 %, 43 % and 43 %, respectively, towards the United States greenback.

Disclosure: The writer holds BTC, AST, REQ, OMG, FUEL, ZIL, 1st and AMP on the time of writing.

Binance phone symbol by means of Shutterstock

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New Proposed ETF Would Mix Bitcoin Futures With Sovereign Debt

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A brand new proposed exchange-traded fund (ETF) would spend money on bitcoin futures – even though handiest as a part of a bigger set of extra conservative investments.

Reality Shares ETF Trust, a department of Blockforce Capital, which already introduced one ETF with blockchain products, filed a Form N1-A with the U.S. Securities and Exchange Commission (SEC) Monday in partnership with NYSE Arca, taking a look to release the Reality Shares Blockforce Global Currency Strategy ETF.

If authorized, the fund would spend money on a portfolio which incorporates “high-quality, short-term sovereign debt instruments listed for trading on U.S. exchanges and denominated in U.S. dollar, euro, British pounds sterling, Japanese yen and Swiss francs,” in addition to bitcoin futures, cash marketplace mutual price range and/or different coins equivalents, in step with the submitting.

The fund would spend money on cash-settled bitcoin futures contracts, moderately than bodily settled. In different phrases, when the contract expires, the investor would obtain the money an identical of its worth, moderately than precise bitcoins. According to the submitting, “the fund will not invest directly in bitcoin.”

The proposal explains:

“The Adviser initially constructs the Fund’s portfolio by investing approximately (i) an equal-weight of 15 [percent] of the Fund’s net assets in Fixed Income Securities denominated in each Fiat Significant Global Currency; (ii) 15 [percent] of the Fund’s net assets representing notional exposure in Bitcoin Futures and (iii) 10 [percent] of the Fund’s net assets in Money Market Instruments for margin and/or cash management purposes, each as measured at the time of purchase (the ‘Target Portfolio’).”

Reality Shares’ submitting is going on so as to add that “the Adviser seeks to reallocate the Fund’s assets approximately to the Target Portfolio on the business day following the date that one or more of the Significant Global Currencies moves by more than 20 [percent] up or down from its original 15 [percent] portfolio equal-weight, calculated as a percentage of the Fund’s net assets.”

Initially, Reality Shares plans to spend money on the bitcoin futures presented via the main Chicago futures exchanges, Cboe and CME, even though it could search for different bitcoin futures merchandise sooner or later.

Bitcoin ETFs

Reality Shares’ proposal comes at the heels of 2 bitcoin-specific ETF filings made via Bitwise Asset Management and VanEck/SolidX last month. While Bitwise’s proposal used to be additionally filed via NYSE Arca, VanEck and SolidX are running with Cboe BZX Exchange.

The VanEck/SolidX proposal is famously just like an previous proposal that many was hoping will be the first bitcoin ETF authorized. However, the firms pulled the previous version after the extended U.S. government shutdown, pronouncing on the time that they had been not able to continue discussions about the proposal with the SEC.

Both of those bitcoin ETFs range from Monday’s submitting in that they don’t come with sovereign debt tools.

The SEC has now not but revealed Reality Shares’ rule trade proposal on its web page, indicating that it has now not but begun inspecting the product. Once the proposal is revealed within the Federal Register, the SEC could have at maximum 240 days to resolve whether or not to approve or reject the rule of thumb trade proposal.

T-bill image by the use of JHerbstman / Wikimedia Commons

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Central Bank of Laos Issues Warning Against Using Cryptocurrency

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The central bank of Laos has warned the public against the use, purchase or sale of digital currencies, local news outlet Vientiane Times reported on May 21.

The Bank of the Lao PDR has issued a warning to financial market participants and the public against cryptocurrency transactions as they are considered illegal in the country. The bank previously banned financial institutions from conducting any operations with cryptocurrencies, as well as making investments in such an asset.

The bank is purportedly concerned about the anonymity of the sender and receiver in a cryptocurrency transaction, which it worries increases the risk of digital assets’ use in money laundering. A source familiar with the matter told Vientiane Times that authorities do not have a relevant security system to protect cryptocurrency owners.

While some countries like, Canada, Malta and Switzerland have embraced the new asset class to varying degrees, officials around the globe are still expressing skepticism toward crypto, while some hardliners call for outright bans.

In the United States, where the legal status of crypto can vary state-to-state, California Congressman Brad Sherman recently called for a full ban on cryptocurrencies. Sherman claimed that crypto presents a threat to the power of the U.S. dollar to affect world economic developments.

In April, Cointelegraph reported that the Indian government was considering a complete ban of cryptocurrencies under the Prevention of Money Laundering Act since it could purportedly be used for money laundering. The Ministry of Corporate Affairs reportedly stated that cryptocurrencies are used in fraudulent schemes to “defraud gullible investors”.

That same month, news broke that Pakistan — which banned cryptocurrency trading last April — is implementing new cryptocurrency regulations in an effort to improve its track record in fighting financial crime. The move was reportedly in part a reaction to demands from international monitoring body the Finance Action Task Force, which has repeatedly voiced concerns about cryptocurrencies’ role in terrorist financing.

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