You might have seen Ripple’s news yesterday, but turns out that is not the only big development in #blockchain this week—it’s now exploring the final frontier. Yep, that’s right: blockchain in #space. If you don’t know, Ripple raised $ 55 million in funding yesterday, as well as adding seven new #banksRead More
Bank Innovation
Fintech.Li präsentiert hier wöchentlich die wichtigsten #News rund um #Fintech in der Schweiz, Liechtenstein, Deutschland und Österreich.
PayPal im Visier: Klarna veröffentlicht erstmals Nutzerzahlen in Deutschland
paydirekt hat es vorgemacht – den Vergleich mit PayPal. Nun will sich auch Klarna (unter dem neuen Chef Marc Berg) mit dem Zahlriesen vergleichen. So habe man, wenn man Klarna und Sofort-Überweisung zusammenrechnet, 15 Millionen Kunden bei Klarna plus 21 Millionen Kunden bei Sofort-Überweisung. Mehr erfahren
Cashpresso startet: in 10 Minuten zum Dispo-Kredit
Wiener FinTech cashpresso bietet unabhängigen Dispo – bis zu € 1.500 – direkt am Smartphone. Kontoeröffnung komplett online, abgeschlossen in 10 Minuten. Kreditrahmen frei verfügbar und sofort zur Auszahlung bereit. VC Fonds Speedinvest, Hansi Hansmann, Runtastic Gründer und Stefan Kalteis investieren. Mehr erfahren
Twint: Der Konter gegen Apple Pay steht
Die helvetische Antwort auf die digitale Brieftasche von Apple hat grünes Licht von den Wettbewerbshütern erhalten. Das ist auch ein Achtungserfolg für die Post-Tochter Postfinance. Mehr erfahren
Schweizer Startup will Broker-Monopol brechen
Zwei Schweizer Analysten und ein Investor-Relation-Spezialist entwickelten eine «Dating»-Plattform, um Investoren und Firmen zusammenzubringen. Jetzt legen sie los, wie finews.ch erfahren hat. Mehr erfahren
Savedroid angetestet: Mit Smooves (flexiblen Sparregeln) automatisch Geld zurücklegen
Auch in Zeiten von Nullzinsen ist Sparen immer noch der beste Weg, sich seine kleinen und großen Wünsche erfüllen zu können. Nur braucht Sparen etwas, das längst nicht jeder hat: Disziplin. Und hier kommt Savedroid ins Spiel. Mehr erfahren
Die UBS bietet Apple die Stirn
Im Wettbewerb der E-Wallets will die grösste Schweizer Bank gegenüber Apple nicht klein beigeben. Digitalisierungs-Leiter Andreas Kubli erklärt gegenüber finews.ch, warum die UBS auf die helvetische Twint-App vertraut. Mehr erfahren
Vontobel globalisiert digitale Plattform
Die Bank Vontobel bietet ihre 2015 lancierte digitale Plattform für Privatkunden nun auch weltweit an – und das ist nicht alles. Mehr erfahren
Gehypte Banking-App N26 startet Überweisung per Siri
Künftig lässt sich mit N26 auf dem iPhone per Sprachsteuerung und im Messenger Geld verschicken. Damit gelingt dem Berliner Startup ein Angriff auf die P2P-Apps. Mehr erfahren
Glarner Kantonalbank eröffnet Kreditfabrik, hypomat.ch wird für Hypotheken-Laufzeiten bis 15 Jahre ausgeweitet
Die Glarner Kantonalbank (GLKB) treibt die Industrialisierung der Bankprozesse weiter voran. Sie lanciert eine Kreditfabrik zur Verwaltung und Abwicklung von Finanzierungen. Zudem bietet die Bank unter der Marke SOFTLINK die vier Module Hypothekenvergabe, Dokumentenerstellung, Hypothekenverwaltung und Vermögensverwaltung zur Lizenzierung an. Mehr erfahren
GFT Digital Innovation Labs/ Digital Banking: Fidor schließt Innovationspartnerschaft mit GFT
Fidor und GFT Technologies wollen gemeinsam mobile Finanz- und Banking-Apps entwickeln und ebenfalls den damit verbundenen Vertrieb verstärken. Dies sei ein erster Schritt, um die nächste Generation des digitalen Bankings innerhalb eines starken Netzwerks gemeinsam zu gestalten, heißt es. Mehr erfahren
Swisspeers: Eine Schweizer Crowdlending Platform für KMU
Das Unternehmen Swisspeers mit Sitz in Winterthur hat eine neue Online-Plattform für Peer-to-peerFinanzierung initiiert, die Investoren und kleine und mittelständische Unternehmen (KMU) mit Finanzierungsbedarf zusammenführt. Dieses Finanzierungskonzept zielt darauf ab, die Innovationsfähigkeit von KMU zu unterstützen und die Schweiz als Wirtschaftsstandort zu stärken. Mehr erfahren
Bald wechseln wir Konten wie Handyverträge
Aufgrund steigender Gebühren kann sich mittlerweile jeder vierte Bankkunde vorstellen, sein Girokonto zu wechseln. Gut, dass Banken Sparer ab kommender #Woche innerhalb von zehn Tagen kostenlos wechseln lassen müssen. Mehr erfahren
Bald liest die UBS ihren Kunden die Wünsche vom Gesicht ab
Und das im wahrsten Sinne des Wortes: Die Grossbank trägt sich mit dem Gedanken, eine entsprechende Software konzernweit einzusetzen.. Mehr erfahren
Fairr.de schließt Millionenrunde ab
Schon einmal hat Transamerica Ventures in ein deutsches Fintech-Startup investiert: Vor zwei Jahren beteiligte sich der New Yorker VC an Auxmoney. Nun folgt das zweite Engagement. Zusammen mit der IBB Beteiligungsgesellschaft steckt Transamerica Ventures eine Millionensumme in das Berliner Fintech Fairr.de. Wie hoch das Investment genau war, wollte das Startup auf Nachfrage nicht verraten. Mehr erfahren
Versicherer AXA arbeitet ab jetzt mit den InsurTechs Friendsurance, GetSafe und Knip zusammen
AXA schließt Vertriebspartnerschaften mit den digitalen Versicherungsmaklern Friendsurance, GetSafe und Knip und hält Ausschau nach Partnern zur Entwicklung zukunftsfähiger Versicherungslösungen. Kommen die Makler jetzt unters Messer? Mehr erfahren
Kostenloses Yomo-Konto zulässig: Bundeskartellamt gibt grünes Licht für die Sparkassen-App
Die Haspa (Hamburg) und die Sparkassen Berlin, München, Bremen, Köln-Bonn, Esslingen-Nürtingen, Paderborn-Detmold planen Yomo („Your Money“) – eine Smartphone-App, die n26 (ehem. number26) Konkurrenz machen soll (wir berichteten). Mehr erfahren
Baloise schafft neue Abteilung für Digitalisierung
Nun nimmt sich auch der Versicherer Baloise dem Thema Digitalisierung verstärkt an und gründet dafür eine neue Abteilung. Geleitet wird diese von einem Kernphysiker, der schon mehrere Jahre für die Baloise tätig ist. Mehr erfahren
Neues KfW-Digitallabor: Tausche Anzug gegen T-Shirt
Wenn eine Bank etwas auf sich hält, braucht sie eine digitale Ideenschmiede. Auch die staatliche KfW will mitmachen – und hat ein Digitallabor gebaut. Doch mit alten Gewohnheiten zu brechen, ist gar nicht so einfach. Mehr erfahren
Axel Springer investiert: 1 MIO € Media-Deal für Cringle
Wir sind unglaublich stolz Euch mitteilen zu können, dass wir mit Axel Springer einen starken strategischen Investor gefunden haben. Im Rahmen einer Media for Equity-Investition beteiligt sich Axel Springer mit 1.000.000 Euro an Cringle. Fürs uns bedeutet das, dass unsere P2P-App mit Hilfe von Print- und TV-Werbung für eine größere Masse beworben werden kann. Mehr erfahren
Security-Experten: Bitcoin und Co. befördern Cybercrime
Die durch Cybercrime angerichteten Schäden sollen sich bis 2021 auf sechs Billionen US-Dollar verdoppeln – befeuert durch die Popularität von Bitcoin und Co., warnen Security-Experten. Mehr erfahren
There’s a $ 500 billion remittance market, and Bitcoin startups want in on it
At just over six years old, Seoul-based KakaoTalk has more than 170 million registered users on its flagship chat app, and enjoys nearly 93% market penetration in South Korea. But when the $ 2.9 billion company made its first-ever overseas investment this spring, it was a surprising one: a 40% stake in Satoshi Citadel Industries (SCI), a Manila-based Bitcoin startup with no connection to messaging. Mehr erfahren
Olga Feldmeier: «In der Schweiz bin ich bald nicht mehr alleine»
Die amerikanisch-stämmige Bitcoin-Firma Xapo mit Hauptsitz in Zug wird derzeit nur von Olga Feldmeier gemanagt. Doch das wird sich bald ändern, sagt sie im Gespräch mit finews.ch. Mehr erfahren
Niklas Nikolajsen: «Banken werden bald Bitcoin-Konten anbieten»
Laut dem Bitcoin-Suisse-Gründer werden auch traditionelle Geldhäuser in Kürze auf die Kryptowährung lautende Konti anbieten. Gegenüber finews.ch kündigte der «Finanzpirat» noch mehr an. Mehr erfahren
Blockchain Marketplace Lykke Begins Crowd Sale; Looks to Raise 1.5M CHF
Lykke, a Swiss startup seeking to build a global marketplace powered by blockchain #technology, has begun its Initial Coin Offering (ICO) campaign as the company looks to raise CHF 1.5 million. Lykke seeks to sell 30 million Lykke coins at the price of 0.05 CHF each. Lykke coins represent ownership of Lykke, an exchange for trading financial instruments built on top of blockchain technology. Mehr erfahren
Blockchain Veterans Unveil Secure Smart Contracts Framework
Developed by Smart Contract Solutions, the open-source Zeppelin project aims to offer a community-driven framework for secure, audited code. The goal is to prevent the unintentional loss of funds, a danger perhaps best illustrated by the collapse of ethereum’s biggest smart contract, The DAO. Mehr erfahren
Mit Blockchain zur Disruption
Die Blockchain-Technologie muss zwar noch einige Hürden überspringen, dennoch steht fest: Wird ihr Potenzial ausgeschöpft, steht ein neues Business-Zeitalter ins Haus. Sind Sie dafür bereit? Mehr erfahren
Studie von Hays und PAC: Digitalisierung – gefragt sind Generalisten statt Nerds
Für die digitalen Themen setzen Unternehmen stärker auf Generalisten und Umsetzer statt auf kreative Köpfe und Nerds. Dies zeigt eine Studie von Hays und PAC “Banken im digitalen Wandel” auf, für die 290 Entscheider aus den Branchen Pharma, Automotive und Banken befragt wurden. Mehr erfahren
ibi-Studie zu Interbankenentgelten(MIF): Kreditkarte ist jetzt das günstigste Verfahren bei Online-Zahlungen
ibi research (Regensburg) hat sich in der Studie “Gesamtkosten von Zahlungsverfahren im E-Commerce – August 2016: Ergebnisse zu den Kosten von Kreditkarten nach der MIF-Verordnung” mit der Frage beschäftigt, in welchem Umfang sich die Regulierung in einer Senkung der Gesamtkosten bei der Kreditkartenzahlung im deutschen Online-Handel niederschlägt. Mehr erfahren
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Uber/AirBnB are often referred to as the poster kids of the ‘sharing economy’ which consequently, yet deceivingly, became synonymous with ‘Uberisation’. Harvard Professor and #sharing economy Guru, Yochai Benkler sheds light on the misconception in an interview with the authors of Blockchain Revolution (p. 134): “It is indeed ‘nonsense’ to call Uber or AirBnB ‘sharing economy’ companies. Uber has used the availabilityof mobile #technology to create a business that lowers the cost of transportation for consumers. That’s all it has done.” These centralized platforms are but service aggregators which use mobile technologies to tap into unused value (be it vacant rooms or be it seats in a car) while creating value for the platform owners, rather than for the participants in the exchange. While some Internet companies, such as Wikipedia, have facilitated genuine sharing, others have appropriated and commoditized the social relationships and vocabulary of sharing. Uber and Air BnB have cracked the code for large scale service aggregation and distribution at global scale, but all this at a cost to the users. Both Uber and Air BnB leverage the value found in excess capacity via participatory platforms which are designed to reward the platform owners. Uber drivers create considerable value but get to keep only part of it. The company retains a significant share of the price paid for every ride, not to mention the retention of user information involved in transactions as well as their moving patterns to be lateron commercialized with no returns to the users – or the risks that that personal information be hacked, which already happened to Uber drivers.
Uber, Air BnB and the likes are smart intermediary platforms that create value for their owners. Namely the value collected from those who use its intermediation capacity to find a ride / a place to stay (or any other service mediated by similar platforms). Users help build such a private network by simply creating a profile with personal information as requested, and the network consists of all the people who exposed their profile to that private network. However, when they try to do business with other people in the network they have to pay network operators in order to do that (ask any Uber driver how frustrating and demoralizing that is!). This begs the question: what would aplatform enabling true sharing economy, with the value created being returned back to reward the value creators, look like? Are there principles which can guide the design of such platforms? To understand the paradigm shift that demystifies the sharing economy lets go back to the basics of communication networks. In such networks decentralization leads to faster innovation, greater openness, and lower cost while it also creates the conditions for competition and diversity in the services the network provides.
This is not the case with the good old landline telephone network. The telephone itself was a very primitive, or as Andreas Antonopoulos calls it – a ‘dumb’ device. The telephone network was a ‘smart network’ offering services dependent entirely on the central switches owned by the phone company, and consumed via ‘dumb’ devices that gave users no opportunity to improve nor change their network providers.
A glimpse into the highly specialized and service-specific networks on which the financial services industry is built, reveals the same pattern. Most of these are layered atop the Internet, but they are architected as closed, centralized, and “smart” networks with limited intelligence on the edge. All these networks mediate the services by interposing the service provider between the “users,” and they allow minimal innovation or differentiation at the edge. The #banks have built closed network systems on top of the decentralized Internet. Only banks can be members, and the network services are highly centralized. Centralized innovation means slow innovation. It also means innovation directed by the goals of a single company.
Enter the #Blockchain to change all this through an open network platform for financial services on top of the open and decentralized Internet. The financial services built on top of blockchain are themselves open because they are not “services” delivered by the network; they are “apps” running on top of the network.
But how can you tell if a network is decentralized, and what makes it more likely to be decentralized? To the novice, Uber-like networks seem to be decentralized… After all, aren’t they running on “smart” devices? Here comes the deception. While Uber indeed runs on a ‘smart’ phone, it does so via a … quite dumb app which is completely controlled by and supports the goals of the company.
Decentralizing that network means to detach people’s profiles from the apps themselves, and expose those profiles to a public shared network. The blockchain offers a secure infrastructure on which this can be done, so the costs of establishing trust become NIL. On blockchain trust does not rest with the organization owning the platform (such as in the case of Uber and AirBnB) but rather it comes with the functionality, security and auditability of the underlying code and the mass collaboration of the countless people securing the blockchain. In fact, the blockchain offers a basic dumb network that connects peers from anywhere in the world. It doesn’t require membership registration or identification. It doesn’t control the types of devices or applications that can live on its edge. It offers one service: securely time-stamped scripted transactions. Everything else is built on the edge-devices as an application. It allows any application to be developed independently, without permission, on the edge of the network. A developer can create a new application using the transactional service as a platform and deploy it on any device. This arrangement opens a market for applications, putting the end user in a position of power to choose the right application without restrictions.
By eliminating intermediaries, the cost for every participant in the network lowers dramatically. Users are no longer needed to pay to private network operators with money, their digital footprint, or by consuming advertisements extensively.
What happens when an industry transitions from using one or more “smart” and centralized networks to using a common, decentralized, open, and dumb network? First of all, the internal costs shrink considerably. The costs of contracting are reduced via software contracts which take care of policing, timely payments, transaction execution, bargain, etc. On this foundation a tsunami of innovation that was pent up for decades is suddenly released. All the applications that could never get permission in the closed network can now be developed and deployed without permission. At first, this change involves reinventing the previously centralized services with new and open decentralized alternatives, which involves the removal of entire layers of intermediaries which are no longer necessary.
The Internet effected such disintermediation by replacing brokers, classified ads publishers, real estate agents, car salespeople, and many others with search engines and online direct markets. In the financial industry, the blockchain creates a similar wave of disintermediation by making clearinghouses, exchanges, and wire transfer services obsolete.
The time has come for the ‘smart’ platform intermediaries, such as Uber and Air BnB to be disrupted.
Where the Internet reduced the cost of search and coordination, the blockchain cuts the costs of bargaining, contracting, policing, and enforcing these contracts. Platform users are peers able to negotiate the best deals and get the service from any entity that is registered on the blockchain platform. Where in contributing to Wikipedia peers do so altruistically, for the fun of it, as a hobby – the blockchain enables reputation systems and other incentives which can reward the peers per the value of their contribution.
For Uber and AirBnB, blockchain technology provides the platform users (aka the suppliers and consumers of these services, namely drivers and their cars, and passengers) a means to collaborate that delivers a greater share of the value back to them. The blockchain can make platform building cheaper through its open APIs (standard common data base) and more manageable through standard common contracts. The common database offer transparency which consumer and suppliers can use to obtain the best terms and also to cooperate as peers to create their own platform rules. If drivers want to set up their own network on blockchain – they do not need the intermediary services of Uber any longer, they can share for good the value they create together.
With this clarified lets return to our initial question and quest for demystification of the sharing economy. The new models would look more like a member owned cooperative. In a car-sharing cooperative most people don’t own cars but rather share vehicles in a commons. All revenue, except for the overhead would go to its members, who would also control the sharing software platform and make decisions. If this were a blockchain-enabled car-sharing platform, it would consists of a set of smart contracts that store data on the cars in the fleet. The initial entry and registration of each driver would contain criminal record, record of previous driving, vehicle ownership, safety inspections and insurance, etc. Smart contracts would continuously watch for timely reinspection/insurance and permit renewals. The drivers have thus created a blockchain cooperative and they receive all the wealth they create. A room sharing coop would consist of a home listings blockchain which also maintains reputations scores and has a similar interface with AirBnB where pictures and info about the rental places can be uploaded. So, the user experience is identical to AirBnB – the difference is that the communication is done peer to peer on the network via cryptographically signed messages that only you and the room renters can see, not stored on AirBnB data base any longer.
In regard to privacy protection, the blockchain enabled sharing platforms do not track nor store all the transactions in a database (as in the case of Uber / AirBnB). They simply return a True or False when an identity request needs to be confirmed, which is validated via a separate service. This separation of identity from the transactions carried between the identities implicitly resolves the privacy issues while reducing risks associated with hacking private information. Smart contracts working in the background also enable personalization of service, such as insurance for the renters based on ther reputation of both owner and renter, house / car value, etc.
These cooperative blockchain empowered platforms enable the rental of excess capacity beyond rooms or car seats. In a true sharing economy, on such platforms people can share anything, such as the examples listed in the book Blockchain Revolution:“expensive power tool or farming equipment used seasonally, as well as garage / parking space, woodwork shop space, a plane / boat or even fishing gear. Further one can rent their commodities such as Wi-Fi hot spots, computing power or storage capacity, the heat generated by our computers, excess energy from our solar panels, extra mobile minutes, and even our expertise. When you travel your WiFi can rent itself out in your absence, charging for every second of usage; further, your subscriptions, physical space and energy sources can become sources of income metering their use directly to a counterparty and charging them for it through micropayments. The blockchain’s decentralized value transfer protocol allows them to securely transact with one another. In the case of a car cooperative people can reserve, unlock and use a car for a certain amount of time metered on the blockchain which will take care of the charges seamlessly per smart contract specifications.”
The blockchain offers a foundation for peer to peer organizations that enable economic models for shared value creation – and open possibilities of ‘prosperity for the many’ through distribution of value creation and value participation, solving the ‘wealth for the few’ prosperity paradox plaguing our society today in spite of increased wealth creation by corporations. To achieve this, Luis Fernando Molina and colleagues propose the following pillars to sustain a sharing economy enabling platform:
● Decentralized: Like the internet, a sharing economy enabling platform is not owned by anyone in particular. Any individual can own some nodes, but not the network itself.
● Open Standard: It is possible for anyone to implement the network protocol. This protocol must be defined by a standards organization where anyone can participate in.
● Open System: Different apps of the same type using the platform can interoperate between each other.
● Permissionless: Anyone can run a network node. Anyone can use the network. Anyone can write apps that consume the network services.
● Dumb (Antonopoulos article from above): It is a dumb network that pushes innovation to the edge, giving end-users control over the pace and direction of innovation.
● Shared Asset: The resulting network of people is a shared commons asset anyone can use. The cost of contacting these people is transferred directly to the people without intermediaries.
● Inclusive: The technology enables maximum connectivity independent of node location.
● Incentivized: There is an economic incentive to run a network nodes.
Molina is working with peers to deploy such platforms which are user controlled, censorship resistant, flexible and scalable – enabling person to person exchange of goods, services, assets and data, and free from the whims, risks, costs and interference of unwanted, self-interested third parties who are no longer needed to facilitate the exchange. Sharing economy blockchain-enabled platforms reward through an open ended stream of micropayments to authors of reusable software components that can be perpetually combined and recombined to create an ever-expanding library of useful, highly customizable, peer to peer commercial applications (‘apps’).
Mike Hearn envisioned such a sharing economy and used the example of an autonomous car to illustrate it. Residents of a particular neighborhood could invest in such an autonomous car and be rewarded with free or discounted rides for a prescribed period. The car owns itself — or, more precisely, the operating computer program owns it. This program would pay the car’s running costs and take in its own revenue on blockchain (from users, investors, etc). The funding itself resonates with the sharing economy – since everyone would share the risk via ‘cryptocurrency assurance contracts’, a blockchain- based version of the popular crowdfunding model in which organizers pledge a certain amount when others’ donations reach target levels. Further, any programmer or niche business can customize ‘apps’ for the car. Such ‘apps’ could post offers on rates, or rank those offers to help the passenger make choices depending various factors (such as if they are willing to pay for faster routes e.g. toll roads etc.) Apps can identify parking options and prices and even book parking spaces in advance. The blockchain-enabled sharing platform could also support safety controls, such as prevention of unqualified or inebriated drivers from taking control of the wheel.
Models for using the blockchain as foundation for the sharing economy are being currently arduously explored, mainly from the perspective of the commons, where thework of Bollier brings forth novel perspectives regarding the deployment of collaborative entities that issue blockchain-based shares—or crypto-equity tokens—that give the holders ownership or membership rights in a type of decentralized cooperative.
I’m still at a loss when it comes to coining a nickname for the “Blockchain-enabled sharing economy” – but I can state for sure that to equate Uber and AirBnB with the ‘sharing economy’ and consequently name it ‘Uberisation’ is a regrettablemisconception!…
[linkedinbadge URL=”https://www.linkedin.com/in/mihaelaulieru” connections=”off” mode=”icon” liname=”Dr. Mihaela Ulieru”] is Global Technology Policy Innovator
Image source I struggled with the headline for this post because the news connects to so many different themes we cover on Daily #Fintech: Real use cases for #Blockchain. #Catastrophe #Insurance and Climate Change. Financial Inclusion. Innovation by Incumbent Financial Services. The new global back office. The #unbundling of verticallyRead More
Bank Innovation
More and more regularly I am asked about good ways to #start looking at #blockchain in more detail. Inspired by Arno’s reading list I decided to share my own version.
While there is obviously a gargantuan amount of information available, not everything is equally suited to do the job. Especially if you are new to the topic or don’t sport a technical background. Additionally blockchain meanwhile features a certain span and so does the interest and perspective of people looking at it.
The following should help to point in a good direction and give you the necessary foundation to understand better what you don’t know. So you can ask the right questions afterwards.
Here is a list of the fundamental resources to warm-up.
Now if you are more interested in use cases and scenarios where blockchain could be applied this information will help. There are far more reports and analysis out than anybody can read in a reasonable time frame though.
Here is the section for the techies amongst you that would like to understand the mechanics and information technology at work.
Here is a basic list of topics for you to assess your level of understanding after you covered some or all of the above.
Do you have any more resources that you think are helpful to get started with blockchain? Post them in the comments along with a brief statement why you believe they help.
[linkedinbadge URL=”https://www.linkedin.com/in/raimundgross” connections=”off” mode=”icon” liname=”Raimund Gross”] is Innovation Manager | Digital Change Agent | Futurist at SAP
[TBT + ICYMI. When I published this exactly three years ago last week, the “denial of #banking services” issue was only known to those of us working in Money Services Businesses. Renamed as “derisking,” it has now become a global phenomenon that is affecting both #banks and non-banks, and has no end in sight.]
Last Friday’s news that the Internet Archive Federal Credit Union (IAFCU) had shut down Tradehill’s account must have sent chills down the spine of every virtual #currency entrepreneur. If it didn’t, it should. The IAFCU was supposed to be one of the few, if not the only, #Bitcoin-friendly financial institution in the U.S. rescuing virtual currency exchangers from ‘banking oblivion’. At this point, we can only speculate about the true causes of this unfortunate situation, and we certainly hope it gets resolved favorably, promptly and permanently.
Let’s hope it’s another case of entrepreneurial immaturity, as that would be the lesser evil compared to other potentially more devastating ones. However, with all due respect to the parties involved in this particular case, there is, in general, a fine line between immaturity and stupidity; one that cannot be ignored in a nascent industry that is riddled with risks, and in which a few bad apples could set the entire industry basket back by years. My point is: Are convertible virtual currency exchangers doing their homework?
News flash 1 to virtual currency exchangers: you are financial institutions!
Being a financial institution requires a heightened degree of governance –organization, discipline and control– as well as excellent stakeholder communications. Even if exchangers choose to partner with a licensed financial institution rather than to obtain their own licenses, a famously daunting and onerous process, they have to remember two things: (1) they still are financial institutions in the eyes of the government, which means they will need to comply with most federal AML regulations, and (2) by extending their licenses to them, their principal partners will be taking on additional risks which, by virtue of the halo effect, could have repercussions in their own existing operations and banking relationships.
In today’s environment, where even non-financial accounts are being closed, how do you think an existing master account depositary institution will react when they find out that their corporate client will be partnering with a Bitcoin exchange?
No Compliance, No Banking
This corollary to the main title has been a well-known necessary, yet not sufficient, condition in the money transmitter industry for a long time.
News flash 2 to virtual currency exchangers: There is a strong correlation –and even causality– between being a money transmitter and being unable to obtain and maintain a bank account.
Having opened, been denied, maintained, and lost dozens of bank accounts in dozens of countries within several money services businesses over the past decade, this is what it all boils down to: No compliance, no banking; no banking, no business. I know that many in the space would prefer things to be different, but TODAY these are the rules of the game.
When FinCEN officially declared on March 18, 2013 that certain ‘convertible virtual currency’ operators were money transmitters, crypto-preneurs fitting this definition had to add the following two items to their long list of problems to be solved:
Applying for and expecting to be granted the luxury to maintain a bank account before completing both of the above is naïve and unrealistic. And it gets worse, even when exchangers have checked the boxes on the two items above, a third condition will be required: the revenue must be large enough to outweigh the bank’s internal risk management costs. I’m sorry if I’ve burst anyone’s bubble, but that has been the story of our lives in the money transmitter industry for a long time.
Tough Choices
As if dealing with the myriad risks and adoption challenges inherent in the #technology itself was not enough, ‘convertible virtual currency’ operators have been confronted with decisions so tough that many may soon be out of business –either because they chose to ignore the FinCEN guidance and its attendant obligations, or because they chose to take them as seriously as expected. The former would get them in trouble with the law. The latter, too deep in the red.
The good news is that, in spite of the tight budgets and the limited options, it is possible to obtain and maintain bank accounts in the United States. It just requires a lot of hard work, and it all starts with a fundamental cornerstone: a world-class risk management and compliance program.
This challenge can be approached in various ways. There are a lot of smart and experienced lawyers that can help understand the details of what must be done. In general, however, they will not be able to help much with how to make it all work within the unique confines of a company, operation and product. In my experience, nobody better to build a solid, sustainable, risk management program than one’s own internal engineers and product owners with the full support of an enlightened leadership.
What are you waiting for, crypto-preneurs? Are the stakes not high enough?
[linkedinbadge URL=”https://www.linkedin.com/in/juanllanos” connections=”off” mode=”icon” liname=”#Blockchain/#Fintech/Compliance Executive & Advisor“]
#Bank of #Tokyo-Mitsubishi UFJ (BTMU) intends to begin managing its contracts on a #blockchain-based platform.
CoinDesk
What do we make of the #blockchain‘s confounding #summer of 2016? CoinDesk’s Pete Rizzo attempts to explain.
CoinDesk
#Overstock subsidiary tØ signs its first broker-dealer, Keystone Capital, in its ongoing effort to build a #blockchain post-trade solution.
CoinDesk
Investors still want a piece of the #blockchain. #Ripple, the enterprise blockchain startup, today announced that it raised $ 55 million in Series B funding to accelerate customer adoption of its #technology. That brings Ripple’s total funding to $ 93.6 million since its launch in 2012, according to Crunchbase. “I think there’sRead More
Bank Innovation
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