The Blockchain Bitcoin & Crypto Weekly CXO Briefing is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world. Each week we select the 3 news items that matter and explain why and link to one expert opinion.
Decrypted: Coinbase, announced that they are on the verge of becoming a broker-dealer, capable of offering crypto securities that will be regulated by the SEC.
Coinbase wants to become a fully licensed broker-dealer through its acquisition of three federally regulated firms: Venovate Marketplace Inc, Keystone Capital Corp, and Digital Wealth LLC.
If approved, these licenses will set Coinbase on a path to offer future services that include crypto securities trading, margin and over-the-counter (OTC) trading, and new market data products.
Our take: Coinbase is working hard to achieve regulatory compliance as the cryptospace strives for mass adoption. With these recent acquisitions Coinbase positions itself as a company that wants to be at the center of everything crypto.
Especially with the Keystone Capital acquisition, which is central to Coinbase’s bid to become a fully SEC-regulated broker dealer.
The main thing that Coinbase gets from the deal are licenses that let it register with the government to offer its customers even more financial services and possibly more altcoins as well.
Given Coinbase’s exposure, as well as the potential threats to their market share from companies like Robinhood, this move is not as very surprising. The broker-dealer status may offer Coinbase a strategic advantage against Circle and Robinhood, which are competing for cryptocurrency customers.
Also, Coinbase announced the intention to support the ERC-20 technical standard and eventually add ERC-20 tokens to Coinbase to trade with fiat currency pairs. Also Coinbase recently received an e-license by FCA, a U.K. regulator and looks to speed up transaction speeds, as well as creating a presence among European nations.
With over 150 different cryptocurrency exchanges, Coinbase is looking at other ways to extend its reach globally and staying competitive. One motive is growth via acquisition, which is on the Coinbase radar.
To this day, with cryptocurrencies numbering over 1,500, Coinbase only offers four on its platform: BTC, ETH, BCH, and LTC. This will very likely change in the future.
Coinbase was founded in 2012 and since then they have made the following five acquisitions: 1) Kippt, a bookmarking tool 2) Blockr.io, a blockchain explorer 3) memo.ai, a Slack-based wiki 4) Earn.com, task-platform 5) Cipher Browser, a dapp Browser.
Though these all of its acquisitions, Coinbase wants to be seen as the gateway to a more open financial system for the world, and wants take its own substantial cut in the process.
With all said and done, the battle between the market participants has definitely begun and we can expect many strategic and counter moves as they fight for market share.
Decrypted: ZhongAn, an Insurtech company, sells innovative insurance products such as freight insurance and mobile screen insurance with the tremendous consumer base of e-commerce in China. It was founded in 2013, and some top notch backers: Ant Financial, Tencent and Ping An Insurance. Ant, an affiliate of Alibaba, operates China’s largest retail payments platform, Tencent runs the country’s top mobile messaging service and Ping An is one of China’s largest insurers.
ZhongAn, a Chinese insurance giant that provides infrastructure to 10 local insurers. It has recently partnered with more than 100 hospitals to utilize blockchain technology in securely processing patient data and financial information. Chen Wei, ZhongAn’s CTO said the company is already using blockchain to securely store and process data, which will eventually allow the company to minimize risk and improve pricing.
Our take: The insurance business is in the middle of a massive transformation. After decades in with little change, insurtech start-ups are leveraging the internet, apps and new technology such as blockchain to rewrite the rule book.
The 2017 World Insurance Report by consulting firm Capgemini and industry body Efma found that nearly a third of insurance customers globally are now using solutions from insurtech providers, as opposed to traditional insurance companies.
Insurance is backed by statistics and blockchain can help to connect massive and varied data. Insurance sales used to rely on agents and individual sales people, however younger generations prefer making online purchases. Insurance clients no longer need to file paper documents as proof. Instead they can just say when and which hospital they went to.
In blockchain, transactions are time-stamped and immutable, so identities are secure, and all data is far more trustworthy. This means that fraud is more easily detected, which could have profound implications in the insurance industry, where some 65% of all fraudulent claims go unnoticed. According to the Institute of International Finance, some $60 billion of fraudulent claims are submitted annually in the U.S. and Europe alone, so any meaningful reduction would bring substantial benefits to insurers’ bottom lines.
A 2017 IBM survey of 200 healthcare executives in 16 countries found that 16% expected to have a commercial blockchain solution at scale in 2017, while 9 out of 10 institutions planned to invest in pilots by 2018.
Blockchain’s dependability and security can enable new self-executing agreements, that use smart contracts, that were largely theoretical before blockchain. For instance, a life insurance smart contract could immediately release funds to a beneficiary upon the death of a policyholder, by checking the digital records of death certificates.
Dramatically reducing the need for human involvement, processing claims can be accelerated, error and delay free. The potential for blockchain in this industry is huge, offering enormous opportunities to savvy entrepreneurs that will build products that solve real problems, reduce costs, and at the same time offer improved service to insurance customers.
Decrypted: The Moscow Exchange (MOEX) is gearing up to enhance the infrastructure, to permit companies to conduct Initial Coin Offerings (ICOs). MOEX is developing the basic infrastructure in order to facilitate the companies to actively take part in ICOs and publish token sale data.
Alexander Afanasiev, CEO of MOEX, said the exchange will not list tokens. However, they will provide information about the responsibilities of token issues along with the detailed explanation of some tokens and ICOs to investors.
“Right now we’re looking at this from the point of view of fiat currencies, since cryptocurrencies don’t have the status of a legally protected asset. If they obtain that status, then we will place them in our system as well”.
The Russian government is reviewing cryptocurrency regulation under the Digital Assets Regulation Bill, filed 25 January. The bill defines cryptocurrencies and tokens as digital financial assets. If the bill passes in its current form, it would allow trading on cryptocurrency exchange operators with authorized Know-Your-Customer (KYC) standards. This would also apply to initial coin offerings (ICOs) established in Russia. The Russian Duma will also lay out specifications for interacting with crypto and blockchain-related technologies.
Our take: In the first quarter of 2018, Initial Coin Offerings (ICOs) have raised over $3.4 billion, exceeding the total amount raised from January to November of 2017. This explosive growth has fueled excitement from speculators, scammers, and smart investors alike, and shows no sign of slowing down in Q2.
While we’ve seen problems, because of uncertainty and lack of regulation, the ICO market isn’t going anywhere. The reality is that there is too much potential in ICOs and both companies and investors do not willing to let go.
The ICO 2.0 will be an industry dominated by security tokens and the sale of securities. It will require paperwork and planning.
After the SEC in the United States decided to focus on ICO fraud and make it its top priority for 2018, the blockchain world began to experience significant changes. The SEC’s ruling last year that The DAO tokens were securities and should have been registered as such marked the first step towards regulation of the ICO market, sending a strong signal to other countries.
What happens in the US is going to drive what happens to ICOs in other places around the world.
ICOs can no longer be about launching a token in just two hours of coding and make hundreds of millions of dollars, when there is not even a functioning business plan in place yet.
With investors much more cautious and regulations on the horizon, the days when a group of visionaries with a white paper was enough to attract tens of millions are coming to an end. The focus in 2018 is on viable business models and roadmaps, not just visionary ideas and non-existent products.
While action by regulatory authorities may create obstacles for new ICOs, the hope is that sensible regulation will create a more reliable environment for investors.
Perhaps the biggest obstacle ICOs face from a regulatory perspective is that each country they sell to has a different legal framework, and making it expensive, time-consuming and inefficient. That’s why we see ICOs ban US. citizens all the time, so they don’t have to deal with the SEC.
It is our hope that global governments will provide much-needed direction on the future regulatory environment ICOs and a co-ordinated, approach. It is also our hope that governments will see the potential of the ICO capital raising model and how it democratizes access investment funds for startups.
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