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Last week we have read several big stories in the bitcoin and blockchain area. Here are they:

Jon Matonis: Banking cartels could use private blockchains as blockades

The economist Jon Matonis, the former executive director of the Bitcoin Foundation, believes banking cartels obsessing about private blockchains must answer a fundamental question: “Are these private blockchains going to be able to be used against smaller financial institutions or weaker nations to institute a blockade, just as SWIFT and CHAPS are able to do today?”

Read Jon’s statements here.

5 Major Banks Which Are Looking Into Blockchain

1. Citibank. The world’s eighth largest bank recently announced that it has been researching and developing distributed ledger technology for the last few years. Kenneth Moore of Citigroup Innovation Labs was quoted as saying, “We have up and running three separate systems within Citi now that actually deploy blockchain distributed ledger technologies.”

2. UBS. Swiss banks are highly regarded in the global financial market, so it is no small thing that UBS announced this year that it would open a research lab in London devoted to exploring the application of blockchain technology. Oliver Bussmann, the CIO of UBS, said in a statement, “Our innovation lab at Level39 will provide a unique platform to explore emerging technologies such as Blockchain and crypto-currencies, and to understand the potential impact for the industry.”

3. Barclays. As we continue our tour of world banks, we move to one of Britain’s standouts. Barclays signed an agreement with European-based bitcoin company Safello to test applications of blockchain technology. Frank Schuil, CEO of Safello said, “If a Tier I bank signing a proof-of-concept with a bitcoin company isn’t a sign of the times then I don’t know what is … their attitude is changing and it is changing fast.”

4. Goldman Sachs. This mega investing firm acknowledged the advantages and drawbacks of bitcoin as a currency in a report released in 2014, which suggested that while bitcoin has work to do, blockchain holds immense promise.

5. Société Générale. A major French bank, SocGen made news recently for posting a job listing for an “IT developer on bitcoin, blockchains and cryptocurrencies”. This move, while newsworthy, is increasingly common as major banks around the world are quickly making moves to take advantage of potential blockchain benefits.

An Open Letter To Our Politicians on Bitcoin

Elected Officials Everywhere,
In the 1800s, the United Kingdom passed a series of laws that became known as the Red Flag Acts. These acts were aimed at a new invention that was beginning to disrupt the rail car and horse and buggy industry. This invention was called the automobile and its purpose was to leverage technology to be more efficient. Unfortunately, due to the Red Flag Acts laws, it had the opposite effect.
The Acts included corrosive regulations, like requiring a man to walk in front of the automobile as it entered town waving a red flag to notify the citizens of the pending “danger on wheels” headed their way. They also severely limited the speed these automobiles could travel, which was one of the primary benefits that they offered. But what they really limited was one thing: innovation.
The acts stifled innovation and made it difficult for this disruptive idea to grow as quickly as it did in other countries, and in the end, the United Kingdom was left behind in the race to develop the automobile.
You might not be shocked to hear that it later turned out it was lobbyists for the rail car and horse and buggy companies pushing for these stifling laws. These companies were able to squeeze out profits for a few more years but they did so at the cost of their country. Their singular focus on the profitability of their own industry, and their powerful grip on politicians who made the laws, allowed them to stifle innovation, which ultimately damaged the United Kingdom. Britain lost its standing in the multi-billion dollar auto industry to Germany, Italy, the U.S., and others.
We are in the midst of another revolution now and it embarrasses me to say that the United States is following the path the United Kingdom followed with the Red Flag Acts of over 200 years ago. We are stifling the innovation of what people refer to as one of the most important technological developments since the internet. I am talking about the technology called Bitcoin.
You’ve probably heard of it in the news. The mastermind of an online drug empire going to jail, the collapse of MtGox, and the laundering of money through this invisible currency. While these juicy headlines spread like wildfire there is much more going on that does not. Did you know the NYSE is building a platform for trading stocks via Bitcoin technology? What about the fact that nearly $1 billion has been invested into Bitcoin-related startups in the past 2 years? Have you heard of the dozens of Visa executives leaving their jobs to join Bitcoin companies?
Bitcoin is surrounded by misconceptions. Despite what many think, Bitcoin is not just a currency. Bitcoin is a technology. It is a platform and it is capable of doing what no other technology has ever done in the past. Imagine escrow without escrow agents, or a real estate title system that didn’t require a $15B industry just because it can’t maintain proper databases. Imagine being able to send a penny to someone in the most remote jungle of China, and then them being able to send it right back to you. All for free and all done instantly.
While I could go on and on with examples for you, the truth is, no one really knows what Bitcoin will do in the future. This is the case with every new technology. Imagine back when you first heard about the internet, did you ever imagine what it would be capable of today? What about the cell phone 20 years ago? If someone had told you that you could run your entire life from your pocket, you would have thought they were crazy.
My point is this: no one can predict what a technology is capable of because that’s what technologies do, they evolve and expand, and the good ones disrupt inefficient systems.
While this seems logical to most, this logic doesn’t seem to be understood in the offices of our state and federal regulators. Several states (recently including New York) are passing aggressive laws that they say are aimed at safely regulating Bitcoin companies. But the laws they are passing are not constructive regulations–they are designed to stymie innovation.
Bitcoin will continue to grow, because there is no real way to stop an innovation that people demand and see value in. Innovation is like a stream of water. You can block it, but it will always grow in size and eventually forge new rivers around the dam. That’s exactly what we are seeing happen now: jobs, technology, and entrepreneurs are flowing right out of this country.
Earlier this month, the BitLicense passed in New York. Twelve leading Bitcoin companies announced they would leave New York that day. Bitcoin sites offer notices on the homepage that they don’t serve Russia, North Korea or New York. Does that not alarm anyone? The financial capitol of the United States, indeed of the world, is being left behind.
Do you not find it concerning that a state in the United States of America is appearing alongside countries that are known for abusing their citizens’ rights? What kind of message does this send?
The BitLicense of New York passed and other states will likely continue to pass similar laws. These laws will slow down Bitcoin’s growth here in America, but Bitcoin will continue to shape global financial markets and change the way business is done all over the world. The question is whether America will be there for it, or find itself playing catch up and working at a disadvantage to other countries who were more receptive to innovative technology from the start.
It doesn’t matter how much money lobbyists give, the laws that corrupt politicians pass, or how many big companies work to eliminate Bitcoin. It’s not going anywhere and there is nothing anyone can do about that. Bitcoin connects the world financially just like the internet did.
The internet brought people online and Bitcoin is bringing money online.
I ask you to do your research, call upon experts, and spend time reading about the opportunities a technology like Bitcoin can bring to our world. Read it with an open mind; pretend you are just reading about the internet for the first time 20 years ago. Would you be skeptical? Of course. Would there be concerns about regulation? Absolutely.
Passing regulations on Bitcoin now is a foolish and irresponsible decision. To do so is to assume that one understands how the technology will develop, how it will be applied, and how many applications it might have. These are the very early days of a very powerful technology, and it is too soon to try to draw it into a regulatory box.
The United Kingdom missed an enormous opportunity with the automobile, but they learned an important lesson. In fact, today the UK is leading the world in its support for Bitcoin technology by passing laws that make it a favorable destination for companies all over the world. They understand, as we should, that to compete in the global economy demands early adoption of new technologies, not skepticism and heavy handed regulation.
You don’t stay on top by stifling innovation; you stay on top by innovating. It’s a truly scary path we are headed down and you have the power to stop it. Will you?
We have always been a nation of pioneers, let us continue writing history with our inventions.
Sincerely,
Paul Puey
Co-founder & CEO of Airbitz

3a30capitol Bitcoin for Governments, but Without Privacy and with Taxes

Banks and governments are warming up to the possibility of leveraging the power and resiliency of the blockchain to implement smarter financial systems that permit faster and cheaper local and global transactions, permanently recorded in a tamper-proof blockchain. At the same time, financial institutions and states find some aspects of Bitcoin worrisome.

One concern is that the Bitcoin network relies on anonymous miners to validate transactions. This concern is addressed by various concepts and implementations of “permissioned blockchains” that are popping up, which would offer the advantages of digital currencies powered by public blockchains but be restricted to banks and vetted financial operators. Permissioned blockchains have been supported by Accenture and Digital Asset Holdings CEO Blythe Masters, and criticized by Jon Matonis and legendary cryptographer Nick Szabo, among others.

Another concern is the privacy and semi-anonymity of Bitcoin. Many governments have expressed the position that private digital currencies shouldn’t be tolerated because they can facilitate criminal activities and money laundering, and make tax collection much more difficult. So, on the one hand governments wish to modernize the financial system with blockchain technology, but, on the other hand, they want to remove privacy.

Concepts and implementations of blockchains without privacy, where all users are explicitly identified, and all transactions traceable by the government by design, are beginning to appear.

The website of “identifiable digital currency” GreenCoinX highlights a statement of Bill Gates in a 2014 Bloomberg TV interview:

“The customers we’re talking about aren’t trying to be anonymous, they’re willing to be known, so Bitcoin technology is key, and you can add to it or you could build a similar technology where there’s enough attribution where people feel comfortable that this is nothing to do with terrorism or any type of money laundering,” said Gates.

GreenCoinX, developed by GreenCoinX Inc., a company jointly owned by lead developer Nilam Doctor and investment company GreenBank Capital Inc, has digital identification built-in.

“Other cryptocurrencies are not identifiable and, therefore, those cryptocurrencies are not only susceptible to be used for illegal purposes, but are not easily taxable by governments,” state the developers. “These concerns make global acceptance of cryptocurrency transactions more difficult. GreenCoinX provides a solution by adding email and phone identification to all GreenCoinX transactions. Those intending illegal activities will likely not use GreenCoinX as they can be easily identified. Furthermore, global governments will be able to collect taxes based on GreenCoinX transactions with country-by-country rules for each type of transaction.”

GreenCoinX is clearly and unambiguously targeted at governments. The developers hope that governments around the world will adopt their digital currency to automate tax collections in the context of an efficient digital economy. The government section of the GreenCoinX website invites all governments to contact the developers to build custom implementations of GreenCoinX tailored to specific national requirements and laws.

“GreenCoinX is flexible and modifiable such that each government can decide what identification rules they require for a GreenCoinX transaction and what country-specific taxes should be attached to each transaction,” reads the call for interest. “Additional parameters can be added on an as-needed basis depending on the requirements of each country.”

The GNU Taler project, promoted by the Free Software Foundation and developed in the GNU framework in collaboration with INRIA, is a new free software system for electronic payments under development. Unlike BitCoin or cash payments, Taler will be aimed at ensuring that governments can easily track their citizens’ income and thus collect sales, value-added or income taxes. Taler will not be a new currency, but use an electronic mint holding financial reserves in existing currencies such as U.S. dollars, euros or bitcoin.

The government section of the GNU Taler website notes that, with Taler, the receiver of any form of payment is known, and the payment information comes attached with some details about what the payment was made for. “Thus, governments can use this data to tax businesses and individuals based on their income, making tax evasion and black markets less viable.”

However, GNU Taler is different from GreenCoinX because, while it doesn’t protect the identity of the merchant, it does protect the identity of the customer. The identity of a customer won’t be revealed to the merchant, and the government won’t be able to learn how consumers spend their electronic money.

“To facilitate end user anonymity, we are developing a system for anonymous payment called GNU Taler,” said Free Software Foundation founder Richard Stallman in a comment posted to the Institute for Ethics and Emerging Technologies website. “With anonymous payment, we can put an end to surveillance-based web services that collect dossiers about their users.”

The GNU Taler project seems an interesting attempt to put together two conflicting requirements – anonymity for consumers and ability for the government to tax merchants. However, the government doesn’t want to know only how much a merchant earns, but also who buys what. Therefore, it seems likely that governments would prefer simpler systems with no privacy at all, such as GreenCoinX.

9af1fire money Bitcoin Venture Capital Markets Heating up as Five Bitcoin Startups Raise $45 Million

This week, five Bitcoin startups, including Chronicled, Chain, Abra, Case and Coinalytics, have raised more than $45 million in funding from Wall Street investors and banks, Silicon Valley venture capital firms and angel investors. The recent funding rounds also showed a significant increase in corporate investors, rather than just traditional venture capitalists. These five funding announcements follow several months without any big fundraises and may signify that the bitcoin investment market is beginning to heat up again.

Chain Inc. Raises $30 Million from Visa and NASDAQ

Chain Inc., a blockchain software company, has raised $30 million from Wall Street investors and companies, including Visa Inc., Citi Ventures and NASDAQ Inc., to enable developers and financial institutions to design, deploy and operate blockchain networks to trade and transfer financial assets and smart contracts.

As an investor and a strategic partner, NASDAQ will be using the technology of Chain Inc. to facilitate unlisted companies on its private market, without the involvement of third-party startups and developers.

“We believe in the power of blockchain technology to transform how financial assets are transferred, but it has to be done with the right partners to ensure it gets off the ground,” said Adam Ludwin, CEO of Chain, in an interview with The Wall Street Journal.

Today’s banking and financial systems are extremely inefficient; it takes days to weeks to settle and process the transfer of assets or stocks, which also requires the involvement of intermediaries and regulators in its process.

The blockchain in contrast, enables instantaneous settlement of payments, transactions and assets, thus cutting a significant portion of the cost of asset trading platforms and companies. Furthermore, the integration of the blockchain technology onto today’s stock market trading platforms could rid the services of intermediaries, which account for a large portion of the costs of major stock market trading platforms such as NASDAQ.

Bitcoin Remittance App Abra Raises $12 Million

Global bitcoin remittance startup Abra has raised more than USD$12 million in a Series A funding round participated in by Arbor Ventures, RRE Ventures and First Round Capital, to further develop the iOS mobile application and to expand the reach of its services to as many countries possible before its official launch.

“Abra is fully leveraging the potential of the technology by reducing friction in financial services. It’s not about bitcoin for the sake of bitcoin – it’s about how the technology can solve problems for consumers worldwide, even if they don’t know what the blockchain is,” RRE Ventures general partner Jim Robinson told CoinDesk.

Abra, a remittance app launched at the Launch Festival 2015 founded by former Netscape director Bill Barhydt, aims to gather as many trusted “tellers” or users to create a bitcoin-based Western Union type of service that enables users to send and receive bitcoin quickly, anywhere in the world.

During his presentation at the festival, Barhydt explained, “Our mission with Abra is to turn every smartphone into a teller that processes withdrawals. This is not just another bitcoin app. The wallet is a full-fledged digital asset management system, and you don’t have to understand it.”

Hardware Bitcoin Wallet Manufacturer Case Raises Another $1 Million

Hardware bitcoin wallet manufacturer and developer Case has added another $1 million to their seed funding round from Future/Perfect Ventures.

Just yesterday, the Case team announced their involvement with former JPMorgan executive Blythe Masters’ bitcoin startup Digital Asset Holdings and the development of crypto-security for an interactive marketplace that uses public opinion, news, and other data to produce odds on global event outcomes in a variety of categories including sports, finance and politics, called Pivit.

“Bitcoin and other distributed ledger technologies facilitate the transfer of digital financial assets within cryptographically secured, immutable environments. Case acts as a secure signing device that streamlines this process without increasing the risk of compromising sensitive data,” explained Case CEO Melanie Shapiro in a blog post.

Coinalytics Raises $1.1 Million for Blockchain Data Platform

Coinalytics, a “real-time intelligence service” for blockchain platforms, has raised USD$1.1 million in a seed round led by a Palo Alto-based startup incubator The Hive. The startup aims to provide risk management assessments and analysis technologies to help bitcoin startups, wallet providers, payment gateways and bitcoin exchanges to conduct risk assessments using blockchain analysis.

In an interview with Coindesk, Coinalytics CEO Fabio Federici explained that its clients can accept bitcoin transactions before they are confirmed by the bitcoin mining network, through its in-house tools for pattern recognition and its blockchain services.

“We analyze the inputs of the transaction, the structure of previous transactions and pull in metadata around those inputs to get a feel for whether the customer is reliable,” Federici told Coindesk.

Chronicled Inc. Raises $1.4 Million for Blockchain Authenticity Platform

Chronicled announced a $1.4 million convertible note financing lead by Colbeck with Mandra Capital, Pantera Capital, Social Starts and Seattle Seahawks running back Marshawn Lynch participating. The company is building a blockchain-based platform to verify the authenticity of consumer goods, such as branded apparel.

“The secondary market for luxury goods and collectibles is flooded with fakes, resulting in illiquidity and daunting consumer risk,” said Dan Morehead, CEO of Pantera Capital.

“Chronicled’s technology has the potential to make the market safe and efficient, while giving users a better experience. Luxury goods provenance represents a multi-billion dollar sector where blockchain technology can add unprecedented value.”

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