Facebook’s Reputation Proves to Be a Roadblock for Libra

The focus of the hearing between Facebook’s David Marcus and the Senate on the Libra cryptocurrency was trust—or the lack thereof.

David Marcus, the head of the blockchain division at Facebook, testified before the Senate Committee on Banking, Housing, and Urban Affairs to clarify issues around Libra, the cryptocurrency Facebook revealed last month.

Libra Under Fire

Marcus’ testimony was arranged after Libra attracted national scrutiny from several divisions of the United States government. The Federal Reserve Chairman, Jerome Powell, stated that Facebook should halt development until major concerns around privacy and money laundering are addressed.

The committee has been unrelenting in criticizing Facebook for its previous scandals. Incidents such as the Russian election meddling and Cambridge Analytica dominated the hearing. Making matters worse, this week the FTC approved a $5 billion fine on Facebook for mishandling users’ data. Senators have clearly stated that Facebook is hard to trust right now.

“I don’t trust Facebook, and it’s because of the repeated violations of user privacy and repeated deceit, and I am not alone,” stressed Arizona Republican Martha McSally. “The core issue here is trust.”

Marcus tried to address the claims, noting that Facebook is not the sole member of the so-called Libra Association backing the cryptocurrency and that other members — including the likes of PayPal and Visa — would minimize the company’s influence over the network.

“Facebook is just one vote among many,” he told the Committee.

Facebook Has Trust Issues

The Senators were not convinced. Facebook’s market power, vast resources, 2 billion user base, and founding role in Libra would make it trivial for the company to heavily influence the payment system.

Unlike other hearings, those on the Committee appeared relatively knowledgeable about the potential of distributed ledger technology. Senator Thom Tillis, a Florida Republican, added to the positive sentiment towards crypto, saying the United States should take a leading role in setting cryptocurrency regulation.

However, there is still uncertainty around the securities classifications, tax treatment, and legal status of cryptocurrencies in the United States. This allows other jurisdictions such as Malta and Switzerland to be at the forefront of the cryptocurrency industry.

Nevertheless, the Senate Committee was more concerned about the trustworthiness of Facebook over the threat that Bitcoin, or any other payment network, poses to the U.S. financial system.

As Senator Brown effectively summarized:

“Why with all of your problems should we trust [Facebook] with something as important as a worldwide currency and the damage that can come from it.”

Credit Card Company Shinhan Card Wins Patent for Blockchain-Based Payment System

South Korea’s leading credit card firm – Shinhan Card – has been granted a patent for a blockchain payment system, according to local news outlet The Korea Times reported on July 15th.

According to the news, Shinhan Card has developed – with the newly patented technology – a blockchain-powered credit transaction process, which allows for setting spending limits as well as paying in monthly installments and carrying out payments.

The Korea Times cited an official from the company, who stated that “services using those key functions of credit cards will be extended to the blockchain-based system, a notable advancement from the status quo whereby most of the blockchain-based services available are limited to cash wiring or user identification for online transactions.”

The official from Shinhan Card further added that the patent had been obtained about a year and a half after the company commenced a feasibility study including technology reviews. At the moment, the company is working on acquiring patents in European countries, the U.S., Japan, China, Vietnam and Indonesia.

The patent-winning technology could also allow for card-less transactions, allowing customers to make payments via app-to-app transactions using mobile devices. Subsequently, this has the potential to get rid of three intermediaries, including credit card firms, a value-added network (VAN) service provider and a Payment Gate (PG). Value-added networks are service providers connecting credit card companies and member stores to verify and approve transactions, while the payment gate is tasked with carrying out the payment.

The patent filing, which is currently available on the website of the Korea Intellectual Property Rights Information Service (Kipris) gives an overview of the invention as follows:

“A blockchain generating unit for generating a blockchain including a virtual currency generated according to a credit limit of a consumer and updating the blockchain according to payment details, and a transaction generating unit for storing transaction conditions corresponding to each of the plurality of accounts and for making settlement using the blockchain according to the transaction conditions.”

Earlier in May, Shinhan Financial Group (Shinhan Bank), the parent company of Shinhan Card, revealed a blockchain-based platform which aimed to speed up the approval process for loan products. Particularly, the bank would use the blockchain platform to verify the items of proof required for credit lending, such as qualification or certification documents.

Shinhan Bank has sought to expand the use of blockchain technology in its processes since last year. It fully embraced blockchain technology with transactions that involve Interest Rate Swap (IRS) and smart contracts. Most recently, several reports have alluded that the bank is planning to impose tougher regulations on accounts linked to cryptocurrencies.

Blockstack is the First SEC-Approved Token Offering Under Reg A+

The United States Securities and Exchange Commission (SEC) has granted blockchain-based startup Blockstack clearance to run a $28 million public token offering under Regulation A+, according to an official blog post from Blockstack.

According to news, Blockstack will launch its token offering online on Thursday, July 11th.  It will be open to any purchaser in the U.S. and globally, who would like to take part in the Blockstack next-generation computing network.

Blockstack is a blockchain builder that has raised $47 million through a previous token offering under Regulation D, which is a different provision that does not require SEC approval but is only limited to accredited investors. In comparison, Regulation A+ is open to all companies and individuals and serves as an initial public offering (IPO) alternative for smaller companies to publicly raise money with less strenuous accounting and disclosure standards than a regular IPO requires.

Although previously companies have taken advantage of Regulation A+ funding, this marks the first time that investors will receive a token, rather than shares in the company. This development has the potential to be a game-changer for other crypto startups that are looking to sell tokens but not equity in their companies whilst also remaining SEC-compliant.

Blockstack founder Muneeb Ali has shared his enthusiasm, however stated that the process has very long and costly since the SEC had to devise a brand new protocol for token offerings under Reg A+, something the regulator had never done before.

Accordingly, the startup has spent 10 months and approx. $2 million to gain approval from the SEC. Ali apparently said that Blockstack had to develop a protocol for running what is essentially a regulated ICO through Regulation A+ from the ground up.

This is possibly a precedent-setting moment for the crypto space, according to reports. Initial coin offerings (ICOs) have lost much of their appeal ever since they became the target of an SEC crackdown. According to WSJ data, ICOs attracted less than $120 million to their coffers in Q1 2019 in comparison nearly $7 billion in the year-ago period.

Meanwhile, recent poor performances and fraud concerns surrounding some of the Reg A+ IPOs have discouraged Nasdaq and the New York Stock Exchange from Reg A+ listings. Against this backdrop, having the SEC’s approval on a Reg A+ token offering may shed light on a new path for blockchain companies to raise funds under regulation, according to the startup.

Now that Blockstack has successfully created this new path for blockchain companies to raise funds, certainly more companies will now be encouraged to seek SEC approval for their token offerings rather than argue with the regulator that their tokens are not securities.

Fujitsu Announces Digital Identity Tech with Scoring for Trustworthiness

Fujitsu Laboratories has announced a newly developed technology – the “digital identity exchange technology.” The new technology aims to enhance the security of online transactions and according to the company it is based on blockchain.

The new technology will enable individuals as well as businesses to make online transactions, which will confirm the identity of other parties involved. In addition to that, the identification system assesses the trustworthiness of the other party’s credentials.

The decentralized identification tool analyses the risk of falsification, and effectively establishes a reputation and rating for each party involved depending on how other trustworthy users have scored them. They each contribute and store the data on a shared unfalsifiable distributed ledger.

The Japanese tech firm has stated:

 “A trustworthiness score is attached to each user by weighting factors including how many trusted users evaluate them highly. Even if a user colludes with a third party to improperly raise their evaluation, the graph-structured relationships will reveal information such as the weakness of their relationships with other users, giving the system the potential to identify misrepresentations.”

It is further mentioned that the technology will support more secure online services, operating with an added advantage of user-friendly features such as graphics that offer visualizations of the relationships between users.

As the number of online transactions has been increasing and cases of fraud and misrepresentation has motivated the company to work on the decentralized identification tool.

“The rapid advance of digitalization in recent years has been accompanied by a dramatic rise in the number of online transactions in which users cannot see one another face to face, making it difficult to judge the credibility of the other party and leading to heightened concerns around trust. With reports of fraud and instances of people falsifying personal credentials like work history and professional qualifications growing increasingly prevalent, ensuring the circulation of high-quality, reliable identification data poses an urgent challenge to users and businesses alike.”

Meanwhile, it is not Fujitsu’s first venture into the blockchain space, as the firm has been working on varied blockchain projects in recent years, such as providing the underlying tech for inter-bank settlement, to launching a ready-to-go blockchain service that it said could provide a minimum viable product in just five days, as well as developing tech aimed to spot problems with smart contracts on Ethereum platforms.

Xetra Stock Exchange Lists Its First Blockchain Company

Xetra, a Deutsche Börse-operated stock exchange, has just listed its first blockchain company – the Berlin-based blockchain firm Advanced Blockchain AG. The news was reported by financial news site DGap on July 1st.

According to the official announcement, Advanced Blockchain AG’s shares are tradable on Xetra, starting July 1. Prior to this, the firm was listed on the Frankfurt Stock Exchange in January 2019, as well as on the primary market of the Düsseldorf stock exchange.

The report states that German financial services holding firm Lang & Schwarz facilitated the listing on Xetra as its designated sponsor and market maker.

“This additional trading venue will further facilitate the development of new investor groups, especially with an international background. Existing listings on the Dusseldorf Stock Exchange and the Frankfurt Stock Exchange will continue,” stated Advanced Blockchain AG.

According to DGap, Advanced Blockchain AG develops distributed ledger technology (DLT) software for businesses. Along with its subsidiary nakamo.to GmbH, the firm has built a project called peaq, which aims to provide a blockchain base layer for businesses.

It’s also developing a directed acyclic graph (DAG)-based blockchain called “DAGchain”. When completed, the DAGchain protocol is slated for use in a number of projects in industries such as IoT, automotive, financial and engineering.

The report further reads:

“The Xetra platform offers increased flexibility for seeing order depth within markets and offers trading in stocks, funds, bonds, warrants and commodities contracts.”

Based in Frankfurt am Main, Xetra is an all-electronic trading system launched in 1997 for use on the Frankfurt Stock Exchange. However, since then the system gradually expanded to be used by over 200 trading participants from 16 European countries, as well as Hong Kong and the United Arab Emirates.

According to Deutsche Börse, over 90% of share trading across German exchanges, and around 30% of trading in ETFs in Europe, is transacted through Xetra. Recent data shows that the exchange accounted for €131.4 billion ($149 billion) of Deutsche Börse’s total cash markets €146.0 billion ($165 billion) turnover in May 2019, with an average daily Xetra trading volume of €6 billion ($6.79 billion).

In a separate announcement, the company disclosed that it has signed a letter of intent with a German telecommunications provider and cable operator to develop a block-chain-based protocol for billing in Internet of Things (IoT) networks. The name of the telecom provider, however, has not been disclosed.

Meanwhile, DGap reports that their future collaboration will involve the peaq project and Advanced Blockchain AG’s proprietary protocol DAGchain, which uses an AI-powered decentralized consensus algorithm and incorporates proof-of-stake (PoS) elements.