Saudi Aramco Completes Investment in Blockchain-Based Platform

The venture arm of the world’s most profitable company – Saudi Aramco – has invested $5 million worth of shares in blockchain-based oil trading platform Vakt.

According to reports on Tuesday, Aramco’s Energy Ventures division has invested $5 million into Vakt, which will be used to further develop the platform and expand it into Asian markets.

In addition to investment, the state oil company’s trading subsidiary Aramco Trading will also become a user of the platform. Vakt is currently live in the North Sea Brent, Forties, Oseberg, Ekofisk and Troll crude oil markets, where it reports to have a high market share. According to data, it is processing 90% of the total transactions. Aramco Trading will add its own trading volumes to the blockchain-based platform, which will boost the platform further.

Upon the announcement, Richard James – CFO of VAKT – has explained how Saudi Aramco became their 13th shareholder to join the board.

“This company (Aramco) – part of the most profitable business in the world – has a strong track record of investing in industry innovation.”

“We were not proactively seeking further investors; however, we could not miss the chance to bring on-board a partner of this caliber, which is a tremendous show of faith in VAKT’s vision,” added James.

The platform is using blockchain to digitalize post-trade documents, providing a smooth process from trade entry to settlement by eliminating paper-based processes and manual accounting practices. According to Vakt, the use of blockchain ensures a “single source of truth” for both buyers and sellers, which is stored on an immutable and distributed ledger.

Vakt launched its trading platform in December 2018 with an initial limitation on North Sea markets. The company, however, was created in 2017 by a consortium of industry leaders that included Shell and BP, which were also the first users of the platform.

Other shareholders include Chevron, Total, Reliance Industries, EquinorGunvor, Mercuria, Koch Industries, ABN Amro, ING, and Societe Generale.

On the other side, Saudi Aramco is considered one of the largest companies in the world by revenue and recently had an IPO of 1.5% of its stock – worth $25.6 billion, leading to a total company valuation of $2 trillion.  The company has both the world’s second-largest proven crude oil reserves and the second-largest daily oil production.

Following the news, Hans Middelthon, MD of Saudi Aramco Energy Ventures Europe stated:

“VAKT has demonstrated that their platform has the potential to digitize what is currently a very manual process and be truly transformative to end users and customers.”

Notably, Saudi Aramco has also previously invested in blockchain firms via its venture subsidiary Saudi Aramco Energy Ventures. In May 2019, the firm participated in a $6 million funding round for American blockchain startup Data Gumbo Corp., which is a blockchain-as-a-service startup for industrial companies, especially from the oil and gas sector.

Huobi Closes Investment for Japanese Branch

Japanese financial services firm Tokai Tokyo Financial Holdings has announced that it will invest about 500 million yen (nearly $4.6 million) in the Japanese branch of cryptocurrency exchange Huobi.  

According to a press release on December 26th, the investment in the subsidiary of Huobi is part of a broader collaboration with the goal to adopt new and emerging technologies such as blockchain technology as part of its business development plan.

Upon the announcement, the brokerage firm issued a statement, saying:

“The financial business using blockchain technology has advanced rapidly in recent years with the application area of crypto assets and Security Token Offering (STO) expanding globally. Here in Japan, the relevant ministerial ordinances are expected in force next spring.”

The firm further explained that the capital and business alliance with Huobi Japan will help promote new businesses in the digital assets sector such as crypto asset exchange, initial exchange offerings, local currency issuance, as well as crypto management and storage services. As part of the investment, the brokerage firm will acquire shares in the exchange.

Notably, the firm considers expanding this business to partner regional banks and other regional banks in the future. Further details about the share acquisition by Tokai Tokyo Financial Holdings have not beendisclosed yet, however it is estimated that the acquisition will be finalized in January 2020.

Founded in 1908, Tokai Tokyo is a Japanese financial services holding company and one of the country’s oldest securities trading platforms. It is mainly involved in providing brokerage services through its subsidiary Tokai Tokio Securities. The company has opened up 159 offices nationwide and has reportedly secured net assets worth $1.4 billion. In addition to that, it handles around $39 billion worth of client assets.

According to financial news website Financial Times, Tokai Tokyo Financial Holdings reported a revenue of 57.57 billion Japanese yen ($252.5 million) over the past 12 months. 

Last month, Tokai Tokyo invested $5 million in tokenized security startup iSTOX.  At that time, President and CEO of Tokai – Tateaki Ishida – said that the financial services sector is approaching an important period of change with the emergence of transformative technologies like blockchain.

We believe that forward-looking providers of financial services must embrace this change if they wish to truly serve their clients in the new century,” he further added.

Meanwhile, Huobi Japan CEO Haiteng Chen stated that Tokai Tokyo’s decision to invest represented “greater mainstream recognition.” He further added:

“Tokai Tokyo is a comprehensive securities firm, which will find many areas to benefit in from partnering with Huobi Japan.”

In September 2018, Huobi’s Japanese subsidiaryHuobi Japan Holdingsacquired a majority stake in local cryptocurrency exchange BitTrade and subsequently changed BitTrade’s name to Huobi Japan in February 2019. The subsidiary continues to facilitate cryptocurrency trading.

It seems that Huobi Japan is focusing on expanding its reach in eastern countries as it has recently ceased its operations in the United States. The exchange cited regulatory reasons for suspending its services for US customers.

The SEC Wants to Expand the Definition of the Accredited Investor

The United States Securities Exchange Commission (SEC) has submitted a proposal regarding its definition of „accredited investor“ as well as „qualified institutional buyer“ that would expand the list of people and institutions currently allowed to invest. This could potentially benefit companies that are hesitant to meet full public reporting requirements.

The news was made public on the SEC’s website, where it is stated that the financial regulator was currently looking for commentary from the public on its proposed amendments regarding the above mentioned categories.

The submitted proposal would expand the number of people allowed to invest in private securities, offerings, hedge funds as well as privet-equity funds. At the moment, the regulator defines an accredited investor as an individual with a net worth of over $1 million or earning more than §200,000 in annual income. In addition to that, other means of classifying include being an executive at the company making the offering.

“Our current definition includes investors that spend their days cruising around in a Ferrari that Daddy paid for,” SEC Commissioner Hester Peirce said. “Yet it excludes investors who spend their days earning money and their weekends and nights figuring out how to invest it.”

According to SEC, many people who don’t meet the financial qualifications for accredited investor status are nevertheless knowledgeable enough to participate in private markets; as such the regulator suggested the commission broaden the definition to include a test of an investor’s sophistication levels based on professional knowledge, experience or certifications.

Specifically, the new proposal would include individuals with entry-level stockbroker’s license or other credentials issued by an accredited institution, knowledgeable employees knowledgeable employees might be allowed the same access to their firms’ offerings as executives currently have, family offices with at least $5 million in assets under management as well as spousal equivalents who could merge their assets for the purpose of qualifying as accredited investors.

The proposal is open to commentary and the public can submit comments up to 60 days following the announcement. The agency is also looking for commentary on whether the financial thresholds should be lowered in areas where income levels may be lower and whether investors advised by professional brokers should also be considered accredited.

“Today’s proposals are an important step in our ongoing efforts to assess the private offering framework as a whole, including ways to increase opportunity for more of our Main Street investors to participate in the private capital markets,” said SEC Chairman Jay Clayton.

Circle Continues Sell-Off with Its OTC Desk Moving Under Kraken

San Francisco-based cryptocurrency exchange platform Kraken has announced that it has acquired Circle’s over-the-counter (OTC) desk.

The exchange revealed the new acquisition via a blog post, stating that Kraken has acquired one of the most recognized OTC desks in the industry.

The San Francisco-based exchange believes the new acquisition will boost their services and expand their reach by providing to traders around the world, particularly in Asia. Moreover, it will provide deeper liquidity and tighter spreads across all supported assets as well as improve automation and offer advanced tools to streamline the trade process from quote to settlement.

Kraken’s head of OTC desk, Nelson Minier, will now be in charge of the Circle Trade division, which he plans to expand further by adding twenty more staff.  Minier joined the firm in 2018 and brought with him 20 years of experience on Wall Street, having previously held positions at JPMorgan, Credit Suisse and Bear Sterns.

In the meantime, Circle co-founders Sean Neville and Jeremy Allaire have confirmed the sale of its OTC business, stating:

“We have known and admired Jesse and his team at Kraken for many years, and we have every confidence and expectation that Circle Trade customers and partners will continue to find best-in-class OTC liquidity service and responsiveness through Kraken going forward. Circle Trade represents an enormous success for the industry as well as for Circle, and we’re excited to see Kraken grow it further.”

Founded in 2013, Circle is one of the earliest players in the digital assets industry and its OTC desk was once known as one of the most profitable businesses in the market. Initially, the OTC desk was set up to provide the much-needed liquidity for Circle’s Bitcoin (BTC) payment app. However, given the massive demand in counterparties, its presence grew significantly.

According to sources, Circle has been looking for a buyer for its OTC desk since the summer. The firm had seen a notional volume of $24 billion in 2018. However, the company hit a rough patch in 2019.

In September, it put its research and development entity, Circle Research, on halt and ceased its digital currencies payments app, Circle Pay, to focus on developing its cryptocurrency stable coin project USD Coin (USDC). Earlier this year, Circle laid off around ten percent (10%) of its workforce, citing regulatory uncertainties.

Notably, co-founders Neville and Allaire stated that the sale of Circle’s OTC desk was part of its sharpened 2020 product roadmap, in which the company expressed that it needed to focus effectively on its stablecoin platforms by reducing complexity, tightening its product portfolio, and reorganizing its teams to execute with greater agility.

Fidelity Digital Assets Has Plans for Ether According to CEO Tom Jessop

Fidelity Digital Assets’ crypto chief, Tom Jessop, has recently announced that the firm intends on adding support for Ethereum (ETH) in 2020.

During a recent podcast, Fidelity Digital Assets CEO Tom Jessop stated the firm could support Ether sometime throughout 2020, as long as there is demand for it. He said:

“We’ve done a lot of work on Ethereum. We intend to support it in the New Year. We’re very led by our clients.”

At the moment, the firm only supports Bitcoin (BTC), the most popular digital asset with the largest market capitalization.

As to why the firm supports only BTC, Jessop stated that it derives entirely from the short track-records of digital assets. During the podcast, he explained that a lacking timeline creates a significant barrier when it comes to institutional adoption. In this case, BTC clearly has the longest track-record, and thus has also the highest demand from institutional capital.

Ether, on the other hand, has a shorter history and a relative lack of demand for custody or trade execution which is the main reason it has no existing support from Fidelity. He further added that price volatility, lack of regulatory transparency are also part of the hurdles to institutional adoption.

“Meaning like, ‘How do I know that if I buy this thing, it’s gonna be around tomorrow? Like what indicia of durability or longevity do I have based on the fact that the history of this asset is 10 years old?’ I think many of these things solve themselves with time,” elaborated Jessop.

Founded in early 2019 by Fidelity Investments, Fidelity Digital Assets is a platform that offers cryptocurrency custody and trading tools for institutional investors and traders. Their primary focus is institutional investors, including hedge funds, family offices, pensions, endowments amongst others. The platform does not cater to retail investors, as the platform wishes to protect its clients from the risky market.

As a provider of a growing number of services involving digital assets, Fidelity aims to bring about the reality where all types of assets are issued natively on blockchains or represented in tokenized format. Currently, they provide cold-storage custody services with an integrated trading service.

Meanwhile, the firm was granted last month a trust license by the New York State Department of Financial Services. The new license will allows Fidelity launch a cryptocurrency custody and trade execution platform for institutions and individual investors for New York residents. In addition to that, the firm was also selected by Galaxy Digital to offer third party custody for its two new bitcoin funds.