BIS Wholesale CBDC Proof-of-Concept in Collaboration with SNB and SIX was A Success

The Bank of International Settlements (BIS), Swiss National Bank (SNB), and SIX Digital Exchange has completed a wholesale CBDC proof-of-concept (PoC), which tested the integration of a CBDC with tokenized assets and the feasibility of linking existing payment networks with Digital Ledgers (DLTs).

As earlier reported by BEG, the SNB and BIS were planning to launch a PoC CBDC by the end of 2020; it seems the duo is on track given the latest updates. Dubbed project ‘Helvetia,’ this initiative tested the technical and legal feasibility of integrating digital assets via a CBDC or linking current networks with DLT ecosystems. The press release reads,

“Project Helvetia shows the feasibility of two proofs of concept (PoCs), using “near-live’ systems to settle digital assets on a distributed ledger with central bank money … The collaboration sets the stage for further joint experimentation to assess the impact of digital innovation on the future of the financial system.”

Switzerland, which has long been an international financial hub, is looking to capitalize on the benefits of DLTs to further increase its attractiveness as a haven. SNB’s governing board member, Andréa M Maechler, noted that the SNB is prepared to embrace DLT if this means a better financial ecosystem,

“Irrespective of which technologies the financial markets adopt next, the safety and reliability of Swiss financial infrastructure must be preserved. If DLT can deliver significant improvements in securities trading and settlement, then the SNB will be prepared.”

Pros and Cons for both PoCs

Following the PoC tests, this initiative revealed that both a wholesale CBDC or linking existing payments with DLTs come with pros and cons. The former provides a seamless avenue for settling digital assets but is likely to raise significant governance and policy challenges. As for the integration approach, policy implications are minimal, although stakeholders would have to forego the perks of fully integrating with DLT networks.

Nonetheless, this milestone set the stage for further practical CBDC research according to the head of BIS Innovation Hub (BISIH), Benoît Cœuré,

“If wholesale CBDCs are to fulfill their potential as a new means of settlement, their design and implications deserve close study and consideration. This is only possible via continued deliberations and experimentations among central banks and with other stakeholders, such as market supervisors and the private sector.”

The press release was keen to point out that this innovation is only a PoC test and should be interpreted that the SNB will issue a wholesale CBDC or facilitate exchange clearing through DLT. Meanwhile, other jurisdictions, including Canada, have recently signaled a keener interest in the CBDC developments to hedge for a virtual monetary future.

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Author: Edwin Munyui

US Regulator OCC Proposes ‘Fair Access’ to Banking Services For All Including Crypto Companies

The Office of the Comptroller of the Currency (OCC), the US’s national bank regulator, has proposed a rule that would forbid banks from providing their services to legal industries, including cryptocurrency companies.

As per the proposed rule, led by former Coinbase counsel Brian Brooks, fair access is promoted under which financial services could be denied by banks to customers only on the basis of “quantitative, risk-based standards established in advance.”

They can’t do so due to political pressures, to prevent the customer from entering or competing in a market or to benefit another person or business activity.

Published on Friday, the proposal does not explicitly mention cryptocurrency but is surely welcoming news for the industry, which has been time and again denied the services by the banks.

The proposal does mention Operation Choke Point, an initiative taken by the Justice Department under the Barack Obama presidency that reportedly aimed to shut down the fraudulent businesses and lenders.

It further reads that it has been revealed that the government agencies have pressured banks to sever their financial services access to “disfavored (but not unlawful) sectors of the economy.”

But neither OCC nor banks are well-equipped to balance these risks that are unrelated to the financial exposure, it said.

Marco Santori on US OCC
Source: @MSantoriESQ

“Fair access to financial services, credit, and capital are essential to our economy,” said Acting Comptroller of the Currency Brian P. Brooks.

“This proposed rule would ensure that banks meet their responsibility to provide their services fairly since they enjoy special privilege and powers because if the system fails to provide fairness to all, it cannot be a source of strength for any.”

The proposal is open for public comments until January 4, 2021.

This week, President Donald Trump nominated the acting Comptroller Brooks as the permanent head of the OCC, a five-year stint.

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Author: AnTy

IOTA Tangle Tech Project Funded by Japanese Govt, to Build DLT-based Maintenance Solutions

Japan’s New Energy and Industrial Technology Development Organization (NEDO), a national research and development organization under the Ministry of Economy, Trade, and Industries in Japan, announced a strategic partnership with IOTA Foundation to create risk-based maintenance (RMB) systems across industries using artificial intelligence and distributed ledger technologies (DLTs).

In a press release shared with BEG, IOTA Foundation will team up with Best Materia, IMC, High-Pressure Institute of Japan, The Society of Chemical Engineers Japan, OMC, Lloyd’s Register, and Yokohama National University in the project. The project aims to provide solutions in the 170 Trillion Yen ($1.5 Trillion) domestic social infrastructure conservation market to build durable and secure infrastructure across industries worldwide.

The AI-driven RMB systems built by IOTA Foundation will be integrated across various industries in Japan to target more countries in the future. The project will assess the damages and risks involved in maintenance – using past maintenance data to predict which parts in industries, factories, and plants need maintenance.

As a software solution (SaaS) service, the RBM solutions will provide a decentralized data service built on IOTA Tangle, a distributed artificial intelligence system, and digitization and sharing infrastructure for data.

As Japan struggles to solve its aging problem across the country, the launch of AI-powered solutions will be vital in replacing current RBM specialists who manually carry out the maintenance schedule. Shigemitsu Kihara, CEO at Best Materia, hopes the integration of IOTA Tangle protocol will enable secure collection and storing of RBM related data, “which is the key to the AI system’s accuracy,” he said.

With blockchain-based RBM systems in place, plants and industries will benefit significantly in mitigating risks from the machines’ maintenance, etc. This will further reduce “unplanned outages, improve plant availability and lower costs” by reducing the manual influence and unnecessary repairs.

According to the release, over 30,000 industries require AI-powered RBM systems in Japan alone. The cost to integrate the project is estimated at 30-50 million Japanese Yen each – totaling 900 billion Yen (~$7.9 billion) to 1.5 Trillion Yen (~$13.2 billion).

In an email sent to BEG’s desks, Holger Köther, Director of Partnerships at IOTA Foundation, praises the open-source and distributed risk-based maintenance system. Holger hopes the IOTA Tangle platform will enhance data collection on the project and further stating,

“Digitalizing the risk-based maintenance (RBM) systems for safer and more efficient industrial plants is only one of many applications where IOTA will be used in the future.”

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Author: Lujan Odera

$1.3M in Chinese Digital Yuan Were Spent In The Largest DCEP Test Run in Shenzhen Province

China is on the verge of completing trials and pilot programs for its national digital currency for the Yuan, which they are calling DCEP. The CBDC, which has been under development for over half a decade, is currently being put to the test through various government subsidies and as a form of payment in selected provinces in the country.

During the ongoing pilot run, the Shenzhen province has emerged as the largest spender of the digital yuan. As per a published report in South China Morning Post, over 47,000 consumers in Luohu district of Shenzhen province spent a total of 8.8 million yuan (equivalent to $1.3 million) during the week-long trial run for the digital asset.

As per the report, for one of the largest trial runs conducted by the People’s Bank of China, a total of near 2 million people applied for 50,000 digital ‘red packets.’ Each red packet contained 200 yuan equivalent to USD 30.

The airdropped digital yuan worth $1.3 million was spent in 62,788 transactions at 3,389 designated shops. A female user who was among the selected 47,553 consumers took to social media to share her experience and wrote,

“I received a text message every day urging me to spend the red packet before the trial deadline, so I spent the entire 200 yuan in a department store last Friday,”

Users Find the Use of Digital Yuan Quite Easy

Many users who received the airdropped red packets said that spending the national digital currency is quite easy and not much different than WeChat Pay and Alipay.

A state-backed newspaper also reported that around 110 petrol stations would also begin processing payments in digital currency later this month. The newspaper also noted that the processing of the payment for digital yuan is quite similar to the existing payment modes. The only difference between the current payment modes and the national digital yuan is that it won’t charge any additional processing fee.

Before the Shenzhen trial, a total of 3.13 million transactions have been made in the digital yuan, revealed Fan Yifei, a deputy governor at the People’s Bank of China.

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Author: Rebecca Asseh

Bitcoin Mining Legalized in Venezuela But Being Centralized with National Digital Mining Pool

  • Venezuela has fully legalized bitcoin mining.

According to a recent decree from the National Superintendency of Crypto Assets and Related Activities (SUNACRIP), the use, commercialization, import, and creation of mining equipment in the country is regulated under the new law, as per the local media reports.

As per the decree that came into effect this week, those residents interested in mining bitcoin and other cryptos must apply for a license with the Comprehensive Registry of Miners (RIM), which will facilitate the processing of licenses.

A special license will be granted to those users who wish to manufacture using ASIC equipment or built mining farms. Such users are required to provide information about the type of mining activities they are carrying out.

Besides supervising the creation and import of mining equipment, the authorities will also inspect the mining farms, without any exceptions. Additionally, those involved in mining in Venezuela must keep their documentation and records for ten years.

The cost of managing these licenses is not known yet but will be published later by RIM.

The document further confirms creating a National Digital Mining Pool to bring together all the miners in the territory, and those operating outside the pool will be subject to sanctions and infractions.

By making mining centralized, the government would be the one to control the income earned in the form of rewards from mining BTC and further distributing it among the contributors. This means, the government can impose taxes on the payments and even freeze them altogether.

Venezuela is currently going through an economic and political crisis on top of the hyperinflation and sanctions led by the US. Previously, President Nicolas Maduro launched an oil-pegged crypto called petro, which the US Department of Justice alleged is used to circumvent the sanctions and conceal illicit drug-related transactions.

Also Read: Venezuela Blocks Access to Coinbase & Currency Exchange Platform MercaDolar

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Author: AnTy

Russian Parliament Pushes Forward With the Waves-based Blockchain Voting; Despite ID Issues

  • Russia’s blockchain-oriented voting system set to be used in the upcoming national elections is yet to be fully efficient but will be implemented nonetheless.
  • According to the country’s Central Election Commission, this initiative’s user tests have been successful, although some improvements need to be made on voter identification.

First reported by Russian media, Kommersant, the newspaper, highlighted that Yaroslavskaya and Kurskaya parliamentary elections scheduled for September 13 would leverage this blockchain solution for remote voting. So far, around 15,000 people have registered to vote through this blockchain-based ecosystem, while at least 3,500 had participated in the project’s testing.

The Technical Underpinnings

This project was developed under Russia’s state back telco giant, Rostelecom, which will also host the blockchain nodes on its company servers. Built on the enterprise version of Waves blockchain, the e-voting system leverages some advanced solutions, including encrypted tech that is yet to be battle-tested. Dubbed ‘homomorphic encryption,’ this tech keeps the votes encrypted until voting is over when they can finally be decrypted.

While the value proposed is better than what was used in Moscow’s e-voting, homomorphic encryption poses a challenge when it comes to voter identification. MixBytes Co-founder and Cybersec expert, Sergey Prilutsky, told Coindesk that authorities could meddle with the votes if they are in control of the list. In addition to this, the embedded encryption in homomorphic ‘elliptic curves’ is not considered secure by Russia’s counter-intelligence agency, FSB.

“It uses elliptic curves that are not considered secure by the FSB,” said the Chief Product Officer of Waves, Artem Kalikhov.

He, however, went on to assure stakeholders that the firm is working on this and noted progress with other functions such as e-signatures, which have already been certified by the FSB. Also, Kalikhov said that getting the ‘homomorphic encryption’ certification is unlikely to be a challenge that might stall development.

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Author: Edwin Munyui

US Regulator Authorizes National Banks and Federal Saving Institutions as Crypto Custodians

U.S. regulator, the Office of the Comptroller of Currency (OCC), allows federal banks and national savings institutions to officially custody cryptocurrencies for their customers. The statement released on July 22, confirms that any national bank or savings facility can now hold on to unique cryptographic keys of cryptocurrencies in their vaults pertaining to custody services.

According to the statement, the decision to allow banks to offer crypto custodial services follows a growing demand by investors to safely store their cryptographic keys, which, if lost, capitulates the value of the assets. This news opens up the field to large banks to provide these services, relieving current state-chartered crypto custodians such as Coinbase and Gemini.

Nonetheless, crypto custodial services differ from the traditional custody services banks offer, the statement explained. Given that the digital assets are not physical, digital wallets will be required to safely store the cryptographic keys.

The release, which comes a month after the OCC asked for public input on Crypto and DLT, further states that the increasing technological innovations in the financial world call for “banks and other service providers to leverage new technology and innovative ways to provide traditional services on behalf of customers.”

A modern form of traditional banking activities

Discussing the new regulation, the author of the statement, Jonathan V. Gould, the Senior Deputy Comptroller & Chief Counsel, claimed that cryptocurrency custodial services Is a new form of already existing asset custodian businesses of national banks.

The OCC permits national banks and savings to hold their customers’ cryptocurrencies in both a fiduciary and non-fiduciary role. Banks holding crypto in a fiduciary capacity will need to manage them in the same way as they manage other assets while non-fiduciary capacity targets holding cryptographic keys that control the actual transfer of the cryptocurrency.

Manage your cryptocurrency risk

Brian Brooks, the current head of OCC and a former executive at Coinbase, however, warns on the risk management of custody services across national banks. Focusing on customer assets protection, Brooks said,

“This opinion clarifies that banks can continue satisfying their customers’ needs for safeguarding their most valuable assets, which today for tens of millions of Americans includes cryptocurrency.”

The statement concludes by warning custodians to focus on risk management techniques, due diligence, and KYC/AML compliance as they begin the operations on holding crypto assets. No specific recommendation of customers was provided in the statement with banks open to deal with crypto institutions, as recently seen with JPMorgan onboarding Coinbase and Gemini.

This, however, should be done with the thought that cryptocurrencies do hold their risks and challenges. It states,

“A national bank or FSA engaging in new activities should develop and implement those activities consistent with sound risk management practices and align them with the bank’s overall business plans and strategies as set forth in OCC guidance.”

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Author: Lujan Odera

China’s Supreme People’s Court Releases Guidelines On Protection Of Digital Assets As Property

China’s Supreme People’s Court and the National Development and Reform Commission (NDRC) released a joint statement on the expansion of property rights around various items, including virtual property, data, and digital currencies.

The guideline released on July 22 aims at improving the socialist market to offer a stronger protection stance for private ownership of property. This document opens up regulation and legal protection for new classes of property such as digital assets, virtual currencies, and data.

The new laws focus on seven major areas, including property protection, market order, fair trade, and livelihood guarantee, He Xiaorang, a member of the judicial committee, said. The new guidelines further aim at “protecting private enterprises’ properties from illegal seizing or freezing as well as preventing wrongful rulings by public or judicial systems.”

Despite the mention of digital assets and virtual currencies, the guideline did not define fully what constitutes a digital currency. However, with the digital yuan (CBDC) development in place, the current changes point to the government setting up a solid regulation structure before its launch.

China: Digital assets as property

China’s efforts in developing a CBDC are well beyond what most of the nations across the globe have considered. The government passed its first crypto law in November 2019, aiming at standardizing the application and management of passwords. The law, adopted earlier in the year, protects cryptographic intellectual property rights and promotes the progress and innovation of cryptography and public/private key technology.

Digital assets have been classified as property in a couple of instances across China too. A court judge in April declared Ethereum (ETH) as property in a legal theft case presented. Notwithstanding, back in 2018, another judge ruled on Bitcoin being treated as virtual property across the country.

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Author: Lujan Odera

China’s National Blockchain Service Network Integrates Chainlink; Pushes LINK Prices Near ATH

Chainlink is back to recording gains, up nearly 12% on the back of partnership with China’s national Blockchain Services Network.

The recently launched BSN will be integrating the Chainlink oracle function to its network that enables governments and enterprises to incorporate real-world data such as IoT data, weather, location information, and financial asset prices into their BSN applications. SNZ pool, a PoS operator, will run nodes to support the operation.

Chainlink will be integrated into BSN via the interchain service hub of IRITA, a consortium blockchain product. It will allow BSN blockchain to receive external off-chain data through Chainlink oracles.

The interchain service hub is the first step toward achieving easy and convenient interoperability among all the decentralized applications (Dapps) deployed on the network. Xiang Dai, Deputy Secretary of the BSN Development Association and Director of Planning and Consultation with the China Mobile Group Design Institute Co., Ltd. said,

“We believe that this integration will transform blockchain applications and foster greater growth of the BSN ecosystem – in China and around the world.”

Providing Interoperability to all DApps

This integration is said to provide BSN users reliability, interconnectivity, and additional security to help fuel the growth and adoption of blockchain applications in China and around the world. Sergey Nazarov, co-founder of Chainlink said,

“We’re excited to help build out BSN’s global infrastructure project by providing secure and reliable oracle services. By connecting BSN applications to real-world data, smart contracts can bring new levels of automation and trust to global agreements.”

A working prototype using Chainlink oracle is already underway, and BSN and SNZpool have also allocated resources to support the development of node infrastructure to run IRITA and Chainlink nodes.

BSN is designed to be a one-stop-shop for companies to access ultra-low-cost blockchain cloud computing services. It is used by the likes of China’s State Information Center, China Mobile, China Unionpay, and Red Date Technologies.

“One of the main purposes of BSN is to provide interoperability to all DApps, regardless of whether they are for permissioned chains or public chains,” said Yifan He, CEO of Red Date Technology and BSN co-founder. Also stating,

“On BSN, each Dapp should be able to call any other Dapps in a very convenient and low-cost way.”

More Bullishness

Today, Chainlink also announced that the Ontology network is working towards a mainnet deployment of Chainlink to securely access off-chain data feeds, web APIs, and traditional bank payments. Andy Ji, Co-founder of Ontology said,

“Chainlink has demonstrated a stellar track record in providing bespoke oracle solutions to leading global enterprises including Google, Oracle, and SWIFT.

This experience underlines Chainlink’s credentials as the undisputed, market-leading decentralized oracle network.

This collaboration marks another milestone in our platforms’ long-standing and fruitful relationship, and we are excited to see this integration come to life.”

LINK is today’s biggest gainer among the top 50 cryptocurrencies. The 13th largest cryptocurrency by market cap of $1.6 billion is currently trading at $4.80, just a little off from its all-time high of $4.95 hit on March 4, 2020. In 2020 so far, this hot cryptocurrency is up 160%.

Amidst this price action, people are removing their LINK from cryptocurrency exchanges. Over 285k LINK has been withdrawn from the Huobi exchange in the past 24 hours.

But this isn’t anything new. The total amount of LINK on exchanges has been declining since May 2019.

chainlink-link-tokens-on-exchange-wallets

This behavior, however, is further bullish for LINK as this indicates the investors are preferring hodling instead of taking profits.

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Author: AnTy

Cambodia’s Central Bank Rolls Out Blockchain Payment System Whitepaper; It’s Not A CBDC

After three years of development, the Cambodian national digital currency may be out later this month, according to a recently released whitepaper.

The permissioned blockchain-based payments system differs from the central bank digital currencies, also known as CBDCs, being offered by several states, including China and Russia, the paper states.

Cambodia Launches “Project Bakong” Blockchain

The Kingdom has taken massive steps in introducing blockchain systems into its economy since the National Bank of Cambodia (NBC) set up a commission to look into distributed ledger technologies (DLTs) in the latter half of 2016. Project Bakong is permissioned, based on the Hyperledger Iroha, a business-oriented DLT platform.

A year later, the commission drafted a solution in different sectors of the economy that a quasi-digital currency may be useful under the auspice of “Project Bakong.”

According to the white paper, the project allows the country to transition from a heavily dollarized financial system to a real-time funds transfer system across the population, offering interbank transfers too.

“The implementation of Bakong would connect all financial institutions and payment service providers under a single payment platform which will allow for fund transfers to be processed on a real-time basis without the need of a centralized clearinghouse.”

Notwithstanding, the platform will also offer Cambodians a P2P platform that allows retail transfers and payment options as quickly as sending an email. The system is mobile-based to ensure reach and accessibility to open up the digital finance ecosystem to Cambodians, lifting them from extreme poverty levels.

‘Not a CBDC’

Despite NBC’s blockchain payment system being compared to CBDCs developed by China, Sweden, and the U.S., Cambodia’s system is quite different. While the CBDCs are developed and issued by the central bank, the quasi-digital currency will need to be “exchanged” for Khmer Riel, the official currency of Cambodia.

The paper describes the development of a blockchain payments system as a detour from the long-running use of the dollar. Given the relatively young population, the turn to digital payment systems may well be the key turning point, with over 5 million citizens already having e-wallets to transact digitally.

The paper states the platform was set to launch in early 2020 but is yet to. NBC announced in the fall of 2019 that the payment system could also take on international payments in the future.

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Author: Lujan Odera