Singapore Central Bank Develops Cross-Border Payment Rail with JPMorgan

The Monetary Authority of Singapore (MAS), the country’s central bank, in collaboration with investment bank JPMorgan has developed a blockchain-based prototype for multi-currency payments.

According to an official release on Monday, MAS stated that the latest development for its Project Ubin allows for payments to be executed in different currencies on the same network, enabling cross-border payments. This is the fifth phase of the project, which was developed in collaboration with JP Morgan and Temasek – a government-owned investment company.

Started as a collaborative project to test the viability of blockchain and distributed ledger technology, MAS states that the novel implementation is bringing cost and speed benefits.

“There is growing evidence now that blockchain-based payments networks are able to enhance cost efficiencies and create new opportunities for businesses,” said Sopnendu Mohanty, chief fintech officer of MAS.

In its fifth phase, the prototype developed allows for payments settlement and clearing with different currencies. The payments network will also provide an interface for other blockchains to connect and will support delivery-versus-payment (DvP) settlement with private exchanes, conditional payments, escrow as well as payments commitments for trade finance.

Beyond technical experimentation, the fifth phase of Project Ubin sought to determine the commercial viability and value of the blockchain-based payments network. Until now, MAS and its partners have engaged more than 40 financial and commercial companies to explore the potential benefits of the blockchain-based network.

“The inclusion of non-financial services companies has demonstrated applicability of blockchain technology beyond capital markets and trade finance. We look forward to deeper collaboration and support for Singapore’s pioneering efforts in the blockchain space,” stated Chia Song Hwee, Chief Operating Officer at Temasek.

Investment bank JP Morgan, part of project Ubin, acts as the infrastructure provider for the prototype’s development. The banking giant has tipped its toes in the blockchain industry with various initiatives, including the inter-bank settlement network with its own stablecoin JPM Coin.

“J.P. Morgan is excited to be an infrastructure partner of MAS and Temasek for Phase 5 of Project Ubin. By leveraging our key learnings from building the Interbank Information Network® (IIN) and the JPM Coin, J.P. Morgan is well-positioned to support the development of a blockchain-based payments network and operate at scale.” John Hunter, Global Head of Clearing and Interbank Information Network.

Consultancy firm Accenture is set to publish a detailed report with the results of the prototype by early 2020, which will also indicate additional features that could be provided by the network.

Singapore officials hope that the success of their trial will motivate other central banks to explore blockchain-based settlement networks as well. Recently, People’s Bank of China (PBoC) revealed the development of its own digital currency, while the European Union is considering the issuance of a digital Euro.

Hong Kong Publishes Regulatory Framework for Cryptocurrency Exchanges

Hong Kong’s financial regulator — the Securities and Futures Commission (SFC) —  has published a new set of rules on Wednesday that would allow cryptocurrency exchanges to receive an operating license, a step intended to improve regulation standards and help prevent fraud.

Initially, the announcement was made by Chief Executive Ashley Alder at a local fintech event on November 6th. Speaking at a fintech conference on Wednesday in Hong Kong, Alder explained:

“The framework will enable virtual asset trading platforms to be regulated by the SFC, a major development which builds on a way forward I outlined at the same time last year.”

The new rules, under which exchanges can apply to be regulated from Wednesday, draw on the standards the SFC expects for conventional securities brokers.

According to Alder, the new regulatory framework will focus on how exchanges must approach custody and compliance, particularly with regards to Know Your Customer (KYC) and Anti-Money Laundering rules.

“A platform operator should comply with the KYC requirements which are applicable to a licensed corporation. It should take all reasonable steps to establish the true and full identity of each of its clients, and of each client’s financial situation, investment experience and investment objectives.”

Additionally, it is stipulated that an exchange that wants to be licensed must provide services to professional investors only, have an insurance policy to protect clients in case assets are lost or stolen, and will be required to file a monthly report to the Commission.

On top of that, exchanges must have an independent auditor and only alter existing products or offer new products with the regulator’s approval.  Adler further noted that cryptocurrency exchanges do not need an SFC license to operate as long as they do not trade any products defined as a security.

The SFC adds that non-custodial exchanges will not be considered for licensing, stating:

“The SFC will not accept licensing applications from platforms which only provide a direct peer-to-peer marketplace for transactions by investors who typically retain control over their own assets (be they fiat currencies or virtual assets).”

Last year, the SFC published a license last year that provided fund managers of virtual assets permission to sell digital products to potential investors. However, very few have been able to meet the regulator’s requirements.

Now, the new regulatory framework was developed following consultation with the operators of several crypto-asset trading platforms, which led the SFC to conclude that a credible regulatory framework could allow it to regulate at least some digital asset exchange platforms.

That being said, Singapore-based cryptocurrency exchange Huobi could become first licensed exchange in Hong Kong. The exchange is reportedly planning a backdoor initial public offering (IPO) in Hong Kong. In addition to that, the exchange recently teased a possible push into the securities market, which could tie in with its potential listing on the Hong Kong Stock Exchange (HKEX).

Swiss Crypto Bank Sygnum Receives License in Singapore

Swiss-based cryptocurrency bank Sygnum has been granted capital markets services (CMS) license from the Monetary Authority of Singapore (MAS), allowing it to provide digital asset investment strategies to accredited and institutional investors in Singapore. Prior to this, Sygnum was the first bank to get a banking license from Swiss regulators back in August.

Announced through a blog post on Thursday, Sygnum announced that it had been granted a capital markets services (CMS) license from the Monetary Authority of Singapore (MAS) and given the green light to provide a range of digital asset management services including Bitcoin (BTC), digitized shares and various other financial products to institutional investors and qualified private investors in Singapore.

Stefan Mueller – Sygnum’s Head of Asset Management – stated in the press release:

“The CMS license is an important milestone for establishing our asset management arm, leveraging the vibrant financial environment in Singapore. This is complementary to our banking services in Switzerland and will also benefit our Swiss institutional and private qualified investor clients.”

According to the press release, the first product that the crypto-bank would be offering to Singaporean investors is the multi-manager fund which allocates investments across a portfolio of managers who tap into different and uncorrelated investment strategies for different digital assets. The same product will be launched in Switzerland later this year.

Notably, Mueller stated that he believed that the bank’s multi-manager product approach was a compelling way for professional investors to gain exposure to this emerging new asset class.

 “We want to help our clients construct broader, diversified portfolios with reduced risk and institutional-grade trust,” he further added.

The Swiss bank further noted that the CMS was received by the Singapore-registered entity of the bank and cannot be overlapped with its Swiss entity.

Meanwhile, Singapore has retained its position as a friendly environment for cryptocurrency as well blockchain technology. In addition to that, both Switzerland and Singapore share close financial ties, especially in the emerging Fintech industry and digital assets where much of Swiss-led private banking has made its way to Singapore.

Now with licensing in two financial hubs – Switzerland and Singapore – the company is strengthening its team as well as its ties to each other.

Mathias Imbach – Sygnum’s Co-Founder and CEO of its Singapore oentity – has stated upon the recent acquisition of a CMS license, saying:

“Our dual location – in Singapore and Switzerland – is one of the cornerstones of our strategy. This is reflected across team, advisory council, board of directors as well as investor base. All have been instrumental in our achievements so far across both countries.”

Sygnum is also planning to expand its services to other markets as well, with a high demand for digital assets and management services in regions like Hong Kong, Britain, Italy, Germany, France, Austria, Portugal, and the Netherlands.

China’s Central Bank Will Start Certifying Blockchain Platforms

The People’s Bank of China – the country’s central bank – has announced the launch of a new process for certifying blockchain platforms.

The new verification system, named the ‘Certification of Fintech Products’,  will certify 11 types of financial technology hardware and software that are widely used for digital payment and blockchain services.

On October 26th, the central bank released the first list which includes fintech products that could be used in both front-end and bank-end development for digital payment services. Currently, the new certification system covers all the products that could be involved in digital payment technologies, including point-of-sale mobile terminals, embedded application software, user front-end software, as well as security carriers and chips.

Notably, a specific fintech item included on the list of 11 products is trusted execution environment (TEE), which is a technology that can assist in the establishment of a “consortium blockchain network and verifying blockchain transactions in financial transactions use cases,” according to the filing.

For reference, giant tech company Microsoft filed for two patents in August 2018 to use similar type of technologies with the goal to improve the security and capacity of its blockchain services offerings.

Furthermore, blockchain platforms will be granted a Certification of Fintech Product (CFP) by the central bank only if their products meet the required checks to pass such as prototype examination and on-site checks. In addition to that, the certificate will be reviewed and renewed every three years.

Respectively, during the three year period, the authorities in charge will conduct random inspections on any step of the production process to ensure compliance. Additionally, institutions will be allowed to stamp the certifications on their logo. However, it is not allowed to use the certification as a means to directly promote products or for advertising itself.

The news follows China’s recent praise of blockchain and cryptocurrencies as a whole, with the President Xi Jinping urging the country to accelerate blockchain adoption, noting that it can and will be a big part of any upcoming technical revolutions.

 “[Blockchain will play] an important role in the next round of technological innovation and industrial transformation. Greater effort should be made to strengthen basic research and boost innovation capacity to help China gain an edge in the theoretical, innovative, and industrial aspects of this emerging field,” stated President Xi Jinping.

The central bank is currently working on developing the country’s own digital currency, which will launch soon. The bank forsees the national digital currency boosting the digital payment industry, touting its own coin’s security features and off-line transaction ability as superior to commercial products offered by China’s Alipay and WeChat Pay.

Telegram Delays Token Sale as the SEC Files for Injunction

Telegram is ready to push back their token sale following an injunction initiated by the US Securities and Exchange Commission over the sale of its Gram tokens.

The SEC ordered Telegram to stop the token sale with an emergency restraining order against Telegram Group, Inc., and TON Issuer, the two issuers of Telegram’s tokens listed in the Regulation D filing with the SEC in February and March 2018.

Telegram is ready to follow the SEC’s order for now and delay the token sale.

“Telegram has agreed to stipulate that it will not make any offers, sales, or deliveries of its expected cryptocurrency, called “Grams,” in order to maintain the status quo until this Court can resolve the legal issues at the heart of the matter,” the document reads.

Last Friday, the SEC filed the emergency action against Telegram to prevent it from distributing its Gram tokens, which the agency deems as unregistered securities. The regulator said Telegram failed to register a securities issuance and “committed to flood the U.S. capital markets with billions of Grams by October 31, 2019” — the deadline for TON’s launch.

In a letter to investors following the SEC filed order Telegram said that it has been working with the SEC over the past 18 months and has been surprised to see the lawsuit initiated by the agency. The company also accused the SEC of failing to advise Telegram on its blockchain project and token sale.

By voluntarily stopping the sale and distribution of Gram tokens, Telegram states that the injunction is no longer required, asking the court to deny the SEC‘s motion.

With all the issues around the token sale, it looks like Telegram‘s token launch definitely won’t stick to the schedule.

Following Telegram’s response on October 16, where the company argued that its native crypto is not a security and the preliminary injunction should be denied, the SEC has responded with a new filing in the U.S. District Court on October 17.

In the document, the agency insists that Telegram has actually violated the U.S. securities laws and that a preliminary injunction should be granted to prevent Telegram from further violation, mentioning that the company is likely to violate the law again.

Should the motion pass, this would be a massive blow to Telegram’s efforts who already raised over $1.7 billion in two pre-sale rounds, with major venture funds, including Lightspeed Ventures, Sequoia Capital and Benchmark as investors.