The New York Department of Financial Services (NYDFS) has granted virtual currency approval to commercial banking transactions, authorizing a new system from Signature Bank which will allow corporate customers to make bank payments in a form of virtual currency.
Dubbed ‘Signet,’ the platform will allow the bank’s commercial customers to send transactions in tokens known as ‘Signets,’ allowing for free transactions sent directly at any time via the blockchain.
The approval is part of the department’s approach to fostering ‘regulated innovation,’ in providing greater flexibility for Fintech innovation and research.
DFS Superintendent Maria T. Vullo welcomed Signet, which she said would provide a low cost way for businesses to send payments.
“DFS is pleased to strengthen and foster regulated innovation in New York’s burgeoning financial technology sector, specifically within our state-chartered banking system,” Vullo said in a statement. “New York continues to support and help advance innovation through sound state regulation and with products such as Signet, which provide lower-cost ways for businesses to efficiently make payments.”
Joseph J. DePaolo, president and CEO at Signature Bank, said the support of the Department of Financial Services was crucial in helping them turn their digital vision into reality. He noted, “Through regulated innovation, we were able to turn our vision into a reality. It is clear the Superintendent and Department of Financial Services have thoroughly researched the financial technology arena and understand how it impacts the future of financial services. We look forward to working closely with their team to continue to transform digitally.”
Fintech innovation often runs into challenges with regulation, particularly around transactions that might typically require a degree of regulation and licensing beyond the grasp of most startups.
By giving the go-ahead to the Signet scheme as a virtual currency, the DFS has underlined its commitment to supporting emerging applications for cryptocurrency assets.
The approval comes following an extensive and robust assessment of Signature Bank’s application, and is attached to stringent compliance requirements.
Nevertheless, it demonstrates a proactive response from a regulator, at a time of increasing focus on blockchain developments of this kind.
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Vertcoin (VTC) has fallen prey to a 51% attack, with some estimates suggesting losses have already surpassed $100,000 as a result of double spend transactions on the chain. It is the latest example of a 51% attack, where attackers take control of a majority share of a network, reflecting the inherent weaknesses in the proof of work model.
According to a Medium post by Mark Nesbitt, a security engineer at Coinbase who identified the attack, the requirement for ‘honesty’ in proof of work remains the key vulnerability to attacks of this kind. He wrote: “The “honesty” of more than half of miners is a core requirement for the security of [BTC] and any proof of work cryptocurrencies based on [BTC]. Honest action, in this context, means following the behavior described in the…white paper. This is sometimes described as a “security risk” or “attack vector,” but is more accurately described as a known limitation to the proof of work model.”
“Failure to meet this requirement breaks several core guarantees of the Bitcoin protocol, including the irreversibility of transactions,” according to Nesbitt.
The attack follows on from several other similar attacks this year, including those affecting MONA, BTG and XVG. According to Nesbitt, this demonstrates the vulnerability of the so-called ‘long tail’ of crypto assets, as well as the weaknesses of the proof of work system.
“These attacks on VTC are not the only examples of a successful 51% double spending attack. 51% attacks occurred in BTG, XVG, and MONA earlier this year; this is merely another incident that shows that threat actors exist that are both resourced and sophisticated enough to execute this kind of attack. This recent spate of successful 51% attacks has significant implications on what is often referred to as the “long tail” of cryptocurrency assets,” he explained.
“There are a large number of cryptocurrencies, including many based on [BTC], that implement their own proof of work based blockchains. Observers of the industry have claimed that these assets have the same properties as SegWit. This claim has now been undeniably, empirically proven to be false.”
With attacks of this kind becoming increasingly common, it looks as though more unsuspecting crypto investors will be caught out by investing in insecure tokens.
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Abu Dhabi Global Market (ADGM), the financial centre of the UAE’s capital, has successfully completed trials of a new app for improving Know-Your-Customer (KYC) processes, known as e-KYC.
The app is designed to simplify the know-your-customer obligations incumbent on financial institutions and other regulated bodies under anti-money laundering laws, and was developed with blockchain partners, banks and advisors, including KPMG.
Rather than submitting to individual ID checks and verification, the app enables customers to verify their identity on a one-off basis, recording the information immutably on a blockchain. From there, the information can be accessed securely by other institutions, with a full audit trail to ensure compliance with relevant laws.
According to those participating in the trial, the technology has allows for a “radically simplified” KYC process, which will deliver cost and efficiency savings during the onboarding process.
Richard Teng, CEO of the FSRA of ADGM, welcomed the project, and the “tangible benefits” it delivers for financial institutions in improving the KYC process. He said, “By harnessing the power of technologies such as blockchain, the e-KYC project has demonstrated tangible benefits that may be offered by an e-KYC utility for financial institutions in the UAE. In addition to enhancing KYC checks across the industry, the utility can achieve significant cost efficiencies and financial inclusion driven by unified KYC standards.
According to the executive, “The use of digital platforms to share information, transact and test solutions forms a core part of ADGM’s FinTech strategy. We look forward to delivering further meaningful results through the ADGM Digital Sandbox initiative, where we will facilitate FinTech-institutional partnerships and host consortium projects such as the e-KYC project.”
The platform allows individuals to have more control over their personal data, while simultaneously allowing institutional members access to the KYC material they require to discharge their obligations.
At present, KYC checks are conducted on an institution by institution basis, with the app expected to significantly streamline the process.
It comes at a time when several other regulators and banks are investigating blockchain technology for KYC in a bid to improve the efficiency of the process.
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The Swiss financial regulator has issued fresh guidelines for fintech startups, giving leeway to licensees to accept up to CHF100 million ($100.1 million) in public deposits, in a radical move designed to boost innovation in the sector.
The move comes as part of the new Banking Act, which has been designed in part to create more favourable conditions for fintech businesses, including expanding the options for crowd-lending models within a regulatory sandbox environment.
The guidelines are part of a wider strategy of supporting the crypto sector by the Federal Council of the Swiss Financial Market Supervisory Authority, which aims to boost Switzerland’s profile as a global destination for crypto and fintech startups.
Crucially, the new guidelines give crypto businesses the ability to accept deposits from the public without the need for the same authorisations as a bank, enabling them to explore innovative models without the full range of compliance expectations.
According to a statement from FINMA, which will oversee firms in the regulatory sandbox and is responsible for issuing the new licenses, the measures will begin to come into effect at the turn of the year. It explained, “With the new measure, companies with special authorisation can accept public funds of up to CHF100 million from 1 January 2019, provided they neither invest nor pay interest on these funds.”
The statement goes on to reference amendments to the Bank Ordinance (BankO), which will come into force in April 2019, noting, “In the BankO, the sandbox will additionally be extended to include crowdlending business models, whereby public funds up to a total amount of CHF1 million can one day be brokered not only for commercial and industrial purposes but also for private consumption.”
The fintech license is aimed at startups looking to explore models of taking deposits, without investing or paying interest on those deposits.
The policy is designed to help cement the reputation of Switzerland and the city of Zug as a haven for cryptocurrency innovation, with an already established and booming crypto sector in the country.
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The U.S. Department of Homeland Security (DHS) has become the latest arm of government to take an interest in blockchain, this time with a view to develop forensic analysis tools for analysing blockchain transactions.
The department is seeking submissions from blockchain experts as part of a consultation exercise, inviting design applications as well as commentary from interested parties. The process is aimed at exploring solutions that would allow Homeland Security investigators to conduct detailed analysis of blockchain transactions, including privacy coins, which have until now eluded existing analytics technologies.
Interestingly, the Department of Homeland Security specifies that while previous analysis work has been conducted on Bitcoin Core (BTC) blockchain, it is interested in new options for analysis on privacy coins such as Monero and Zcash, which exist within private blockchains.
This is relevant given the association of privacy coins along with BTC in alleged criminal use cases for these digital currencies, with criminals turning to the anonymity afforded by transacting on these blockchains.
According to the solicitation document, the technology should “provide working approaches to treating newer blockchain implementations,” as well as having applicability in other administrative use cases. It noted, “Because of the significant impact in areas such as governance, data sharing agreement enforcement, and encrypted analytics interchanges, there are a wide variety of applications in government and the commercial marketplace that can benefit from successful product development.”
The pre-solicitation notice will be finalised on December 19, at which point formal applications will be welcomed, as part of the initial stages of a process that could offer greater access for the authorities to these closed blockchain networks.
In launching the pre-solicitation notice, the Department of Homeland Security becomes the latest government agency to increase its focus on blockchain technology.
Recently the U.S. Defense Advanced Research Projects Agency announced plans for a two day research event, as part of its interest in “several, less-explored avenues of permissionless distributed consensus protocols.”
It comes at a time of increasing awareness of the value of blockchain technologies in public administration across different sectors, with government agencies exploring a number of use cases for blockchain systems.
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Medici Ventures, a wholly-owned subsidiary of Overstock.com, Inc., has purchased a 10% stake worth $2.5 million in Grainchain, a blockchain software provider that facilitates payments in the agricultural sector.
According to the terms of the acquisition, Medici will have the option to purchase another 10% in the company at a later date.
Grainchain said in its press release that currently, small- to medium-sized farms were behind much of agricultural output worldwide, and that these lacked the resources for more modernized and secure transactions. This is where blockchain technology is seen to help, while cutting middlemen and allowing farmers to keep more earnings.
“At the end of the day, we’re just leveling the playing field for the farmer, giving them much more power and control over the selling process,” Grainchain CEO Luis Macias said.
At present, Grainchain offers its services in the U.S. and Mexico, but said that the Medici acquisition will allow for an expansion of operations to Central and South America.
Medici President Jonathan Johnson said of the investment, “Producers operate on razor-thin margins and are up against a host of factors far beyond their control… GrainChain helps to support those producers by simplifying and securing the measuring and payment process and bringing unprecedented transparency to the industry.”
Grainchain was founded in 2013, and uses a three-part blockchain-based system to eliminate error and fraud in the process of delivering goods to end-users. According to the company, smart contracts are used between buyers and sellers, and Internet of Things (IoT) devices measure both weight and quality of grains at each step of the way. According to its website, the company has facilitated about 84,000 transactions with over 1,400 active participants, and has overseen the processing of nearly 5.3 billion pounds of various commodities.
While Overstock is most known as a retailer, it has also invested in blockchain through subsidiary Medici, which also holds a stake in VinX, a company that tracks wine futures through blockchain. It has been estimated that about 20% of wine worldwide is labeled fraudulently, which makes blockchain a potential alternative to present tracking systems for wine.
Overstock has also invested in tZero, a new exchange specifically for the selling of tokens.
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A payment processor with a significant footprint in the U.S. has joined forces with tech company Vaultbank to bring crypto payments to retail customers. SpotOn, which provides a payment processing solution to more than 100,000 merchants in the country, will soon include crypto payment transactions to its platform, allowing retailers to accept a number of digital currencies, including Bitcoin Core, Ripple, Ether and Stellar.
According to a company press release, customers will now be able to pay in the currency of their choice and merchants can choose whether or not to almost instantaneously convert crypto payments to fiat, or to hold them in their original form. SpotOn also has additional developments in the pipeline, including the introduction of a crypto-based loyalty rewards program and the ability to buy and sell crypto directly on its platform.
SpotOn President RJ Horsely states, “Today’s ever-evolving digital market demands that merchants need a payment service capable of accepting a wider diversity of currencies including virtual currencies. Our new technology will allow thousands of SpotOn merchants to accept cryptocurrency without having to onboard to another payment processor or manually convert cryptocurrency funds into fiat.”
Vaultbank is a firm that creates, issues and trades financial instruments using the blockchain. SpotOn invested in a seed-funding round held by the company, which is developing a platform that will allow users to buy, sell and spend their crypto assets on a single solution. The Vaultbank website indicates, “The Vaultbank Platform plans to tokenize securities like Mutual Funds, and will be a securities compliant platform that performs KYC [Know Your Customer], AML [anti-money laundering], FATCA [Foreign Account Tax Compliance Act] and Accreditation. Users will be able to buy and sell security tokens and top utility tokens at industry competitive rates.”
Vaultbank Chief Operating Officer Aaron Travis added in the press release, “This partnership empowers the customer to pay in whatever digital currency they want, while the merchant gets paid in what they want, dollars.”
By giving merchants an easy-to-use crypto payments solution, coupled with the ability to convert the funds into fiat, can go a long way to helping crypto be accepted as an alternative payment solution. The market volatility has kept many retailers away, concerned about losing revenue. However, transferring funds to fiat – until the markets stabilize – helps to counter this issue.
CoinGeek’s Becky Liggero spoke to BadChain founder Leo Leiman, who is ready to show off his blockchain-themed apparel in whatever conference he attends.
Leo Leiman, founder of BadChain, has attended numerous blockchain and cryptocurrency conferences in the last couple of years. By his count, he’s been to as many as 50 of them. The Malta Blockchain Summit in particular, he said, is “one of the best” he’s been to, with a great number of investors and foundations involved. “You can feel the money from the investor, because if you see someone in Russia who says he’s an investor, he has for example $100,000, but here it’s more true investors, and projects here [are] better than somewhere else,” he explained.
He said the very liberal attitude of Malta when it came to the blockchain industry made it a great venue for the summit. “It is like when Canada or the USA legalized marijuana. A lot of people go there… Here, it’s also, ‘Come here, it’s open, [to] companies for blockchain.”
Dressed up in Bitcoin-themed clothing, he is quick to offer his services. “I can make T-shirts for you, I can make rain coats, or like T-shirts with crypto,” he said, adding that he also designed rings embedded with the cryptocurrency one chooses.
The idea for such designs came from seeing the opportunities among those in the business. “A lot of guys in the industry are smart, and I think that they could be stylish also. And it was like how the idea was born. And I decided to do the merch. It was like this idea, I decided to do it one year ago, and I created a blockchain system for clothing also, just for fun,” he said.
Leiman sees his clothing brand also serving an educational purpose. “I have huge experience in this field, and I know how to make the young generation more happy because they can work everywhere… They can go to, for example, to Malta, and have good income. They can be in this industry, but they have to be smart a bit, smarter than others, but it is okay. It’s a really stylish industry. It is young, fresh,” he said.
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