China Close to Launching Its Own Digital Currency

China’s central bank – People’s Bank of China (PBoC) – has announced that is nearly ready to issue its own sovereign digital currency, according to a senior official.

Mu Changchun, deputy director of the People’s Bank of China’s payments department, has revealed that the bank’s virtual currency was “almost ready” for release. The news was announced by Mu at the China Finance 40 Forum over the weekend.

According to the news report, researchers have successfully developed a prototype that adopts blockchain architecture after five years of research and it is “close to being out.” However, details about the launch have yet to be known.

China’s central bank will reportedly launch its digital token through a two-tier system, with PBoC on an upper level and commercial banks on a secondary level as legitimate issuers.

Mu further explained that issuing a digital currency using a pure blockchain architecture would be difficult to achieve in a country as big as China due to the fact that retailers require high concurrency performance. The bank said it wouldn’t rely on blockchain exclusively, and would instead maintain a more neutral stance on which technology it decides to use.

According to Mu, this will improve accessibility, enhance adoption rates amongst the public as well as promote innovation amongst commercial entities. In addition to that, the digital currency is designed to be suitable for small-scale retail high-frequency business scenarios.

Mu has stressed that the institution’s aim is for the digital currency to replace M0, or cash in circulation, rather than M2, which would generate credit and impact monetary policy. The digital currency would also support the Yuan’s circulation and internationalization, he said.

According to patents registered by the PBoC, consumers as well as businesses would download a mobile wallet and exchange their yuan for the digital money, which they could use to make and receive payments. It is further indicated the wallet would store a digital currency issued by the central bank or any authorized central entity that is encrypted like a cryptocurrency with private keys, offers multi-signature security and is held by users in a decentralized way.

Currently, there are 52 patents filed under the name of the Digital Currency Research Lab of the PBoC, with the latest published in October 9th 2018, having been submitted on March 26th 2018.

Meanwhile, the news comes as global central bankers take a skeptical view on Facebook’s cryptocurrency project – Libra. Earlier in July, former governor of the PBoC Zhou Xiaochuan claimed that Libra poses a threat to payments systems and national currencies and he believed it should come under central bank oversight to prevent potential foreign exchange risks and protect the authority of monetary policy.

Commerzbank Collaborates with Daimler On Machine-to-Machine Payments

Commerzbank, the second-largest bank in Germany, is reportedly exploring a blockchain-based machine to machine payments solution using Daimler trucks, according to an announcement on August 8.

The pilot project has already completed its first testing, where it involved the exchange and settlement of payments between an electronic charging point and a Daimler Truck system without any human intervention. For the transaction, Commerzbank issued Euros on a blockchain and provided Daimler Trucks with ‘cash on ledger’ to process the payment.

Commerzbank’s payments processing uses the Corda blockchain, which is the same technology that has been used by the bank for many of its blockchain initiatives.

Following the testing, it has been determined that both charging and subsequent payments can be processed fully automatically. According to the bank “independent communication and interaction between machines is happening, this also enables the settlement of mutual payments.”

Meanwhile, the system is aimed at a new generation of interconnected machinery capable of operating with surging degrees of autonomy. Stephan Müller – divisional board member transaction banking Commerzbank – explained that the this new system can lead to significant efficiency gains in logistics chains, which could further amplify as vehicle automation increases.

 “After having completely digitised securities transactions in past pilot projects, the focus is now shifting to DLT-based payment structures. […] As a bank we see our mandate as creating new digital payment architectures for our clients.”

He adds that further development steps for blockchain-based payment processing in other sectors such as the chemicals, manufacturing and real estate sectors, are being currently explored.

The new system has been granted regulatory approval from the German Federal Financial Supervisory Authority (BaFin).

On the other hand, Dr Helge Königs, head of the Truck Wallet project at Daimler Trucks, has elaborated on several applications for this new payment system, including how it can prevent fraud. He stated that “this renders it practically impossible to carry out such things as fuel card scams whereby criminals copy a fuel card and spy on the PIN number being entered.”

He further added that in the future using automated payments will enable drivers to focus on other tasks, and will ultimately reduce the need for reconciliation because all the transactions will be on a distributed ledger.

The giant automobile company has noted that the Daimler Truck ID and Truck Wallet are still in the prototype phase. Other potential applications include processing tolls, transmitting freight papers, potentially controlling and billing subcontractor drivers, and processing pay-per-use vehicle leasing.

This is not the first time that both Commerzbank and Daimler have ventured into the blockchain technology.

Earlier this year, the bank executed commercial transactions through trade finance blockchain Marco Polo, as well as processed a commercial paper transaction in minutes rather than days, thanks to the technology.

In addition to that, it had executed two money market tests, one with Deutsche Börse and another with Siemens and Continental. The bank is currently working with the German innovation group Fraunhofer IML to explore the future of exports and trade finance.

Prior to this news, it had been reported in July that Daimer partnered with European blockchain interface solutions startup Riddle & Code to provide an open car hardware wallet solution.

Mastercard Job Openings Hint at Cryptocurrency Wallet Development

Multinational financial services provider Mastercard has recently added three senior-level positions amongst other positions onto their career website with the goal to develop cryptocurrency and wallets solutions.

According to the company’s career website, Mastercard is looking to fill in the position for a senior blockchain engineer and engineering lead, director for product development and innovation, as well as vice president for product management and director of product management for cryptocurrency and wallets.

Based on the job descriptions, the new recruits will work with a cross-functional team comprising of Franchise, Compliance, Regulation, Products, Labs, Regions and Technology to develop new products and solutions.

The director for product management – cryptocurrency/wallets, will be expected to “lead the ideation, definition, design, and development of innovative crypto currency solutions, including wallet solutions,” and to have already had an experience managing cryptocurrency wallet products.

Whilst the company has yet to disclose full details of the planned products’ scope, they do indicate that the new hires will be asked to identify solutions and concepts that have strategic fit and value to Mastercard’s customers and partners.

Other senior roles such as vice president of network tech product management, director of payments platform and networks, senior analyst for strategic program management, mention the need for expertise in blockchain technology. In addition to these top-level roles, the company is also seeking blockchain engineers and analysts with knowledge in blockchain.

The future hire for VP in product management for blockchain/crypto should notably have experience with current payment systems as well as be familiar with relevant industry standards and regulatory requirements, according to the job posting.

Overall, all roles will be required to closely monitor evolving trends in the cryptocurrency industry and initiate solutions for new technological developments as well as emerging risks.

Meanwhile, it is noteworthy to mention that Mastercard is one of the 27 inaugural members that have expressed their intention to join the Libra Association— a consortium established to govern Facebook’s planned stablecoin project, Libra.

Mastercard has been dabbling with the blockchain technology over the last couple of years. In 2017, it announced that it was opening its blockchain to merchants and banks to experiment with a new payment network. Last year, the company hired 175 engineers, including people with expertise in blockchain.

Walmart Files Patent to Launch Separate Digital Currency

One of the largest retailers in the world – Walmart – has reportedly filed a stablecoin patent in the United States, similar to the Libra token proposed by Facebook. The patent was filed with the US Patent and Trademark Office (USPTO) on August 1st.

According to the filing patent – “System and Method for Digital Currency via Blockchain”, the document outlines a proposal for “generating one digital currency unit by tying the one digital currency unit to a regular currency; storing information of the one digital currency unit into a block of a blockchain; buying or paying the one digital currency unit.

Similar to Facebook’s Libra, Walmart’s filing patent suggests that the proposed coin could help provide finance for those with limited access to banking services – one of the major claims Facebook has made for Libra, most likely in an effort to appeal to the public and of course the regulators.

Using a digital currency, low-income households that find banking expensive, may have an alternative way to handle wealth at an institution that can supply the majority of their day-to-day financial and product needs,” Walmart states.

It is further noted that the stablecoin is most likely to be pegged to the US dollar and will support a zero or low fee transaction, as well offer storage for users’ funds, which can be spent, for instance, at retailers or partners, and easily converted to cash. Otherwise, the token will be available for use anywhere.

Notably, users of the stablecoin could even earn interest, according to the filing patent. With Libra, interest earned on the scheme’s potentially vast reserve funds would eventually go to Libra partners that back the company. Walmart, on the other hand, says its token could store user’s purchasing histories on the blockchain, and then apply related savings to their subsequent purchases in a similar way to loyalty points.

According to the retailer giant, the blockchain-based digital currency could further challenge banks by removing the need for credit and debit cards:

The digital currency may act as a pre-approved biometric […] credit. A person is the ‘credit card’ to their own digital value bank.”

Walmart envisions that the scope of its digital currency could extend to form part of wider, blockchain-powered service ecosystem, imagining the creation of an “open-platform value exchange for purchases and for crowdsource work.

This would allow customers to buy products or services for themselves and for others — for instance, making use of the platform to hire a technician for repairs, an associate or a designated shopper for a given amount of time.

Meanwhile, Walmart has already been using blockchain for tracking products such as fresh greens and pharmaceuticals. In addition to that, the company has applied for other patents such as products relating to tracking packages, power supply payments and delivery fleets.

KPMG, Microsoft, R3 and TOMIA Partnership for Telecom Blockchain Settlements

The blockchain industry has been on the radar for many big corporations, which has taken the technology from the realm of skepticism to development of real world applications. In its latest announcement KPMG, the multinational accounting firm, is partnering with software firms TOMIA, Microsoft, and R3 to develop a blockchain for telecom settlements.

KPMG has had some forays in the industry, but this is probably the biggest move. Until now, it acquired a few pilot blockchain solutions related to its industry, aimed at addressing complex cross-border, or cross-network tasks. The recent partnership with Microsoft and K3 will allow the company to tackle data-related issues expected to arise after the launch of 5G networks.

The company states that international mobile data roaming revenues are expected to reach $31 billion in 2022, with an average annual growth rate of eight percent.

It’s that accelerating use of international data that Arun Ghosh, Blockchain Leader at KPMG, addressed in a blog post:

While we will be able to consume more data more quickly and across more locations than ever before in this next wave of telecom advancement, it is becoming increasingly complex for telecom companies to track and settle interchange fees.

KPMG has been working closely with the telecom industry for a long time. The blockchain being piloted aims to reduce the costs, number of disputes, and time involved in telecom settlements caused by “billions of mobile interactions flow[ing] through hundreds of connected networks managed by dozens of customers and suppliers.”

Settlements and reconciliations are currently handled manually, and can take up to a month to complete, according to Ghosh. Most of the data is generated via mobile devices, which needs authentication from at least two parties – a process that has potential for efficiency improvements. He further added that three pillars of cellular settlements are the customers, amount of data generated, and the contract between the two. This makes a blockchain-based solution a good fit for achieving quick settlement times.

While Microsoft acts as the principal architect, R3’s Corda acts as the backbone of the operation, and TOMIA brings a layer of telecom expertise by representing around 40 global operators.

KPMG has previously advised telecom operators on capital-efficient deployment of 5G networks, cyber security, privacy, and data protection, and revenue recognition and lease accounting.