Time to buy more Bitcoin and time to HODL

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No one has a crystal ball to predict the future. With less than a month away from Bitcoin’s halving, will this event boost its price? How does this play out, with the coronavirus pandemic? As economists are forecasting a global recession, many believe that we are preparing for a financial reset. Deutsche Bank sees a digital payment transformation post-coronavirus. The majority in the crypto community believes that Bitcoin could survive a global financial crisis and thrive.

The pandemic is pushing governments to do two things: lockdowns and print money. Both of these things are changing basic habits and trust.

On one end, consumers moved from a “digital-often” world, to a “digital-mostly” world. To slow the spread of the virus, governments have imposed temporary closures to stores, bars, and venues, as well as putting a ban on large public gatherings and encouraging people to work from home. How we shop, bank, work, worship, entertain ourselves and stay connected with each other, is now entirely online.

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The online retail industry has had considerable growth, in sales of consumer goods, especially in heavily-affected countries, such as the United States, Italy, Germany, and the United Kingdom. The coronavirus pandemic has resulted in a quantum leap in the growth of the connected economy. The longer we remain in lockdown mode, the more likely consumer habits will change, and online will become a bigger part of our daily routine, going forward.

The other hand, governments are trying to claw their way out of the coming recession, with a massive stimulus packages.

The US Federal Reserve is doing everything it can. The FED’s measures, include an array of programs to help boost the economy hit by the coronavirus pandemic. It recently announced $2.3 trillion in aid to businesses and governments. The central bank will also buy investment-grade and junk bonds and will offer up to $600 billion in loans through its Main Street Lending Program to SMBs hit by the sudden economic halt. The UK government decided to pay for 80% of the wages in the country. EU finance ministers have approved €500 billion in stimulus measures designed to cushion the blow to their economies from the coronavirus pandemic.

“Extraordinary times require extraordinary action,” Christine Lagarde, the president of the European Central Bank, said last week via Twitter. “There are no limits to our commitment to the euro.”

People everywhere are losing their jobs, and their faith in governments. People are loosing their faith in the money system.

Unemployment in the US reached 6.6 million in a week. Throwing money at businesses is not the solution. I don’t know if government interventions will get economies moving again, but I do know with absolute certainty, that some businesses, banks, and governments will run out of money. In the meantime, as central banks worldwide print more money to keep things moving. The global money supply in circulation will continue to grow and Bitcoin will become more scarce. Infinite growth is only a utopia.

With one month until the third halving in Bitcoin’s history, the daily creation of new Bitcoins will decrease from 1800 to 900. The inflation of the Bitcoin supply will thus drop below 2%, to 1.8%. One of the greatest strengths of Bitcoin is its scarcity. The total supply of Bitcoin will forever remain limited to 21 million coins. It’s not like the U.S. dollar and the other fiat currencies. If you buy a Bitcoin today, you can be sure it will still be equal to one Bitcoin in 10, 50 or 100 years from now. .

What’s the future of Bitcoin post-COVID-19? Will people want dollars or BTC?

Well Bitcoin could get bigger, a lot bigger or things just go back to business as usual. Governments printing money to cushion the blow from the coronavirus pandemic, could make people flock to Bitcoin. Also, geographical boundaries will stop making much sense, which will spur the adoption of a frictionless cryptocurrency.

Bitcoin was created in the midst of the 2008 financial crash and has shown that it could be a possible alternative to central bank-controlled debt-based economy. It is a borderless and permissionless alternative, that is going to be in high demand in the post-coronavirus world. While it has not been battle-tested, it has shown, that unlike the rest of the market, it can survive without bailouts.

History suggests every time there is halving Bitcoin price goes up, The halving which is about to occur, is a crucial point for a new rise of Bitcoin (BTC) and a potential surge that will match its all-time high or even more.

Ilias Louis Hatzis is the Founder at Mercato Blockchain Corporation AG and a weekly columnist at DailyFintech.com.

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This Week in Fintech ending 10 April 2020

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If you want to continue receiving This Week in Fintech, you can either become a paying Member for $143 per year (and receive all our content in addition to this weekly summary) by clicking here.  If you just want to receive This Week in Fintech for free, you will need to fill in this form. Or fill in the same sign up form at the bottom of this post.

Your Editor is Bernard Lunn. He is also the CEO of Daily Fintech.

Monday Ilias Hatzis @iliashatzis our Greece-based crypto entrepreneur (Founder & CEO at Mercato Blockchain Corporation AG and Weekly Columnist at Daily Fintech) wrote Could Bitcoin on DeFi displace banks? Yes.

Decentralized Finance (DeFi) is building a new financial system. The DeFi movement is picking up steam. DeFi has been successful in remittances, loans, stable coins, and other core elements of the fiat world. With a little over a year under its belt, DeFi hit a major milestone a couple of months ago, with more than $1 billion in value locked in the DeFi markets. Bitcoin (BTC) dominates the cryptocurrency market, its 8x bigger than the Ethereum, the second cryptocurrency by market cap, but Bitcoin doesn’t have Ethereum’s sophisticated on-chain lending, derivatives, trading capabilities . While there are already several centralized BTC lending platforms like BlockFi/Nexo/Celsius. Bitcoin DeFi has been a dream for Bitcoiners. Maybe the dream is over and new tBTC project will bring Bitcoin to the DeFi world. Maybe it will do a lot more than that!

Editor note: Hoarding is a huge obstacle to Bitcoin becoming a currency. Lending one’s stash is a good way to get it circulating. 

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Tuesday Efi Pylarinou @efipm our Swiss-based Fintech Adviser,  founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019 wrote Breaking Banks, Silos, or Networks: which is harder?

In innovation, we frequently talk about `Breaking Silos`, one of my favorite cross-disciplinary topics. This past weekend (unusually warm and sunny creating the temptation to be outside) I was ironing as there is no cleaning lady anymore and listening to Episode 19 of `Breaking Banks Europe`. This one was hosted by Matteo Rizzi and Spiros Margaris and with an Ecosystem Zoom into Luxembourg. And who better to discuss this with, than Nasir Zubairi, the CEO of The LHoFT

Editor note: Efi describes how technology that got to network effects has to be accommodated long past it’s sell by date.

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Wednesday Jessica Ellerm @jessicaellerm, our Australia-based Fintech entrepreneur and thought leader specializing in Small Business and the Gig Economy & CEO/Co-Founder of Zuper, a new superannuation startup in Australia wrote Fintech Lenders Incentivised To Help SMEs Navigate Stimulus Packages

As governments unleash rapid amounts of COVID-19 stimulus money for SMEs, one thing seems to be consistent between business owners across the world; utter confusion. With policy changing rapidly, small businesses owners are finding it difficult to assess their eligibility for government assistance, not to mention private sector help. All this is framed against a backdrop of shifting lockdown laws and restrictions, and employees working from home. Not a fun time at all.

Editor note: Jessica’s focus, small business, is in the eye of the storm from global lockdown. In this post she focusses on how Fintech Lenders think about small business credit risk.

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Thursday Patrick Kelahan @insuranceeleph1, our US based Insurtech expert (a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners who also serves the insurance and Fintech world as the ‘Insurance Elephant’) wrote Whose perspective is it? Insurance remains not what it seems at first view

It’s beginning to wear on the insurance industry.  COVID-19?  Kind of.  Moreover it’s the unexpected ripple effects of the outbreak on how lives are led, how insurance intersects life, how perspectives color how insurance news is celebrated or questioned.  We’ve discussed much of COVID-19’s current effects on business and how the future of insurance will need to adapt.  Let’s take this week to see insurance happenings through different lenses, or from a reverse of the Insurance Elephant- from differing perspectives as per sight-impaired gents in the image.

Editor note: Insurance is in the eye of the COVID-19 storm. In this post, Pat looks at the second order impact on Insurance. It is a must read for any senior exec in Insurance. 

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Friday  Sheldon Freedman, Fintech lawyer at Hassans International Law Firm

wrote: Security Token news for Week ending 10 April 2020

This week, our Editor is giving Sheldon Freedman a break so that he can celebrate Passover.

Editor note: This weekly snapshot is the news that matters for busy senior people in the Security Token market.

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Security Token news for Week Ending Friday 10 April 2020

Security Token news for Week Ending Friday 3 April 2020This week, our Editor is giving Sheldon Freedman a break so that he can celebrate Passover.

Here is our pick of the 3 most important Security Tokens news stories during the week:

The SEC wheels grind slowly over tZero Overstock

That is our headline based on a legally dense 16 page statement issued by the SEC, of which this is a small extract:

As described in the Notice,8 the Exchange proposes to adopt the Amended and Restated Limited Liability Company Agreement of BSTX (the “BSTX LLC Agreement”) for BSTX as a facility of the Exchange. 9 BSTX proposes to operate a fully automated, price-time priority execution system to list and trade NMS stocks that meet BSTX listing standards and for which ancillary records of ownership reflecting certain end-of-day security token balances as reported by market participants would be created and maintained using distributed ledger technology (such securities to be referred to as “security tokens”).10

Why it matters: tZero could be a major player in Security Tokens for reasons we have covered many times on Daily Fintech. However to fulfil that promise they have to play in the regulated world where the SEC is the top cop – and that takes time, capital and persistence.

Overstock Is Set to Finally Pay Out Its Digital Security Shareholder Dividend

Overstock.com plans to distribute its long-delayed “digital security” shareholder dividend on May 19.

Shareholders will receive one Digital Voting Series A-1 Preferred Stock (OSTKO) for every 10 of the online retailer’s shares they hold on April 27, the record date, according to Overstock’s Tuesday press release. OSKTO is a “digitally enhanced security” that trades on affiliate tZERO’s blockchain-backed platform – the only trading system that can support it.

If the distribution goes without a hitch, it may validate a corporate gambit whose creator, former Overstock CEO Patrick Byrne, considered revolutionary. Byrne thought the blockchain dividend could drive growth for tZERO’s blockchain trading system and simultaneously “expose the slop” he said was inherent to Wall Street’s capital markets. 

Why it matters: Featuring two of our three stories about tZero seems like overkill, but this story scored a 7 on the Daily Fintech News Quality Analysis (NQA) methodology. It also exemplifies the devil in the details nature of being a major player in Security Tokens in the regulated world. Finally, old fashioned Dividends are back in fashion after the Coronacrash took the froth out of the market.

R3 Teams With Custodian Hex Trust to Help Asian Banks Sell Security Tokens

Asian banks interested in issuing security tokens on R3’s Corda now have a local custodian.

Hong Kong-based Hex Trust is partnering with the enterprise blockchain company to offer banking clients another option for issuing security tokens. The custodian began working with R3 when one of its clients issued collateral tokens for derivatives on Corda. 

“A lot of the new demand coming is for Corda-based tokens or other similar blockchain-based protocols,” Hex Trust CEO Alessio Quaglini said. The custodian joins the roughly 10 other custody firms R3 works with globally. 

Why it matters:  This one bumped a high scoring news item about the SEC; we did not want to look like an outlet for SEC news – but there is good stuff  on our cutting room floor. We think this story matters for two reasons. One it may make security tokens more popular in Asia (which has so far lagged behind Europe and America in adoption). Two, custody is a critical and complex plank that tokenised assets have to get right.

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Editors Note: it was a busy news week in  Security Tokens. We counted 4 stories that scored our minimum target of 6 on the Daily Fintech News Quality Analysis (NQA) methodology and 2 that got close with 5. Plus some good opinion and analysis. So plenty of good stuff had to go on our cutting room floor.

We have a self-imposed constraint of 3 news stories each week because we serve busy senior leaders in Fintech who need just enough information to get on with their job.

For context on Security Tokens please read the chapter on Security Tokens in our Blockchain Economy book and read articles tagged Security Tokens in our archives. 

New readers can read 3 free articles.  To  become a member with full access to all that Daily Fintech offers,  the cost is just US$143 a year (= $0.39 per day or $2.75 per week). For less than one cup of coffee you get a week full of caffeine for the mind.

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Whose perspective is it? Insurance remains not what it seems at first view

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It’s beginning to wear on the insurance industry.  COVID-19?  Kind of.  Moreover it’s the unexpected ripple effects of the outbreak on how lives are led, how insurance intersects life, how perspectives color how insurance news is celebrated or questioned.  We’ve discussed much of COVID-19’s current effects on business and how the future of insurance will need to adapt.  Let’s take this week to see insurance happenings through different lenses, or from a reverse of the Insurance Elephant- from differing perspectives as per sight-impaired gents in the image.

image- MA Devine

Patrick Kelahan is a CX, engineering & insurance consultant, working with Insurers, Attorneys & Owners in his day job. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

  • COVID-19 cannot be overstated as being a health danger/terror. People have minimal control over exposures, and no control over the extent of symptoms if infected.  Similar thought process applies in business livelihoods of employees and SMEs – there’s little control for an individual over business operations, closures, availability of customers, and recovery funds.  Social distance helps in one aspect, but could be business fatal for the other.

 

  • Reductions in driving due to implementation of working from home protocols and staying at home is resulting in renewal of discussions for mileage-based auto cover. While that’s being considered carriers in the US announce premium rebates (Allstate, Liberty Mutual/Safeco, American Family, and now Progressive) and/or premium credits for renewals (GEICO).  Overall the rebates/credits are estimated to total $3.5 billion;  contrast that with the findings of  The Consumer Federation of America estimating US carriers are benefiting in additional profits in the amount of $2 Bn per month.  Carriers need to ensure this does not become a PR issue like business interruption cover has.  The upside?  Fewer auto accidents.

 

  • Government financial recovery programs have been announced in most countries, building optimism for the citizenry and businesses. Problem with government programs for disasters like pandemics is it’s easier to ramp up politicians/ rhetoric than it is to implement and produce the programs’ results.  Example- US Small Business Administration has an effective economic injury loan program, in essence a working capital backstop.  Plenty of funding has been planned but few loans processed to date.  Scaling up and staffing has been a significant challenge.

The time is nigh for the SBA to hand off disaster financial response to fintechs and InsurTechs– the vetting process for disaster loans is just right to digitize, from app to approval to funds distribution.  Just need to change some of the Code of Federal Regulation.

  • AXA’s CEO, Thomas Buberl, has suggested formation of a government/insurer risk pooling scheme to hedge future pandemic responses by insurers. Other similar schemes exist for property damage; need to ensure more than just cost hedging is planned (see Ten C’s Project  and broadening the spectrum of change).

 

  • Lloyd’s offered a parametric hotel product last fall that would provide payments to hoteliers when occupancy rates fell beyond an agreed index. Few chose to participate; all now have regrets post-COVID.  Whether there was sufficient capacity to take care of all potential interested parties will not be known.  My drumbeat – parametric will become the cover of the coming decade.

 

  • Worker injuries will be reduced due to business closures and work from home status (hmmm- what if an employee gets injured during mandated work from home sessions?), but potential high severity COVID-19 claims will be prompted for WC due to exposures during work. It’s not just state regulators in the U.S. who see the virus as a potential occupational disease, the Social Security Organization in Malaysia has deemed the disease as such, India has guidance to employers that WC applies if an employee contracts the disease (and has advised salary compensation applies for quarantine ordered staff).  The Province of Ontario, Canada has also followed suit for WC guidance for essential workers .

 

  • A promising entry into risk financing is the principle of Insurance Linked Securities (ILS), or capital vehicles used to hedge risk, provide coupon return, and widen the source of risk funding into the huge capital pool. Who wouldn’t want to obtain a return on bond investment that is greater than Treasuries,  and certainly better than potential negative rates?  Well seems the reinsurance world has some early grumblings that ILS are muddying the water and softening the rei market.  The remarks in the market that ILS have a destabilizing effect can be read through as injecting some competition and perhaps scraping some cream off the glass of whole rei milk. Thanks to AM Best and Steve Evans of Artemis.Bm for that commentary.

 

As is typical- insurance doings are strongly influenced by perspective, and little is as it first seems. Stay safe and well.

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Fintech Lenders Incentivised To Help SMEs Navigate Stimulus Packages

Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a neowealth disruptor in Australia

As governments unleash rapid amounts of COVID-19 stimulus money for SMEs, one thing seems to be consistent between business owners across the world; utter confusion. With policy changing rapidly, small businesses owners are finding it difficult to assess their eligibility for government assistance, not to mention private sector help. All this is framed against a backdrop of shifting lockdown laws and restrictions, and employees working from home. Not a fun time at all.

It’s an equally confusing time for fintech lenders, who are scrambling to get their heads around what companies in their book are most likely to stop making repayments, and what companies they should be lending to going forward. There is no question some businesses are booming right now, but working out what industries are experiencing ‘flash-in-the-pan’ growth verses sustainable long-term growth is like reading tea-leaves.

In the midst of all of this, is a real opportunity for lenders to do something significant for the small business community, and also protect their own book. This would be to value-add by helping SMEs quickly navigate and access the funding support from governments that they are eligible for. This would de risk the client from a lending perspective, plus truly differentiate the lender from its peers.

Government policies are hard to interpret at the best of times, and offering simple online eligibility calculators and application assistance would I’m sure be hugely welcomed by time poor business owners. Many are in a position where they need to rapidly rethink and pivot elements of their business. How can they be expected to do this, while worrying about applying for funding, or reading screeds of government fine print?

It’s far from business as usual, and lenders who want to survive are being handed the perfect opportunity, on a platter, to do something of real value for their client base, so that both can survive the crisis.

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Interview with Alan Scott about how Stablecoins will change our world.

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Stablecoins is a big wave of change in in Fintech. So I was delighted when Alan Scott agreed to speak to me about how Stablecoins will change our world.

Alan Scott is currently Managing Director EMEA at 24 Exchange. Alan and I first started working together over 12 years ago and I have enjoyed talking to him over the years about all subjects related to cryptocurrency and FX, particularly Stablecoins. Alan is that rare combination, both deeply knowledgeable and an outside the box thinker. He is a serial entrepreneur and senior executive who knows how innovation actually gets traction in the real world. You can read all about Alan on his LinkedIn profile.

I started off by asking Alan to pick the markets most likely to be impacted by Stablecoins. Alan picked 3:

  • The Foreign Exchange market.
  • Loyalty Coins for marketing.
  • New currencies for use by billions of people.

Each is a massive market and a complex subject and so my next question was much harder. I asked Alan to explain succinctly how Stablecoins are likely to impact each of these three markets. Here is what he told me:

How Stablecoins will change the Foreign Exchange market.

FX is a big market, with US$5 trillion traded every day (25x the daily trading volume in global equities).  FX is a hyper efficient market, but the market structure has remained fundamentally unchanged for decades and is dominated by a few big banks (the Interbank players) that quote prices in currency pairs. Stablecoins could change that game. One way to visualise the FX market today is like a hyper efficient version of the early telephone exchanges where each call was connected by an operator. Stablecoins that are designed to be non-volatile against all the major currencies could enable a centralized switchboard where each currency is quoted against that Stablecoin rather than against another currency. That would be a game changer in one of the biggest markets in the world.

How Stablecoins will change Loyalty Coins for marketing

There are two visions of a Stablecoin future. In one vision, we will have one maybe two that get network effects and dominate the market. In another vision, we will have thousands, even millions, of Stablecoin-powered Loyalty Coins that get used for marketing. Maybe the future will be some combination of the two with one or two dominant Stablecoin powering a large number of Loyalty Coins, some of which will compete by offering greater levels of fungibility while still rewarding customer loyalty.

Stablecoins could enable new currencies for use by billions of people.

That is what Facebook wants to do with Libra, which is due to be launched later  this year after their big announcement last year. The idea of a stateless global currency is clearly both big and game-changing. It is unlikely that the nation states who currently control currencies will give that up without doing some innovation of their own.  So we can expect lots of announcements of Central Bank Digital Currencies.

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Breaking Banks, Silos, or Networks: which is harder?

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019.

In innovation, we frequently talk about `Breaking Silos`, one of my favorite cross-disciplinary topics. This past weekend (unusually warm and sunny creating the temptation to be outside) I was ironing as there is no cleaning lady anymore and listening to Episode 19 of `Breaking Banks Europe`. This one was hosted by Matteo Rizzi and Spiros Margaris and with an Ecosystem Zoom into Luxembourg. And who better to discuss this with, than Nasir Zubairi, the CEO of The LHoFT– the Luxembourg House of Financial Technology.

I recalled meeting briefly Nasir for the first time at SIBOS in Geneva in September 2016, before he had given birth and baptized LHoFT. [ SIBOS size conventions may take really long to happen again if they ever happen in that globalized format.] Today we are looking at 4 years of an important ecosystem stakeholder, The LHoFT, whose role in Luxembourg has been vital. Luxembourg is like perfumes that come in small bottles and has distinct top global roles in the fund industry, in green finance, and microfinance (to name a few). As a result, Regtech is a big focus for the LHoFT, especially around anything related to funds. We can actually think of Luxembourg as a predominantly B2B fintech hub with an interest in fund administration technologies, payments (always a core component of finance), and lately blockchain for capital markets. Nasir mentioned a few names of Blockchain4Finance companies in Luxembourg during the podcast, like Tokeny, StokR, FundsDLT which are focused on Tokenization. Such companies are leading the way for the evolution of Capital markets which includes the fund industry.

FundsDLT is a homegrown initiative that I have covered before (Sep 2019) in `Two live Blockchain use cases in Mutual Funds administration and four pilots` along with Calastone and other cases. Just last month FundsDLT announced the closing of a Series A investment to develop a Decentralized platform for fund distribution. Clearstream, Credit Suisse Asset Management, and Natixis Investment Managers were the investors that joined the seed investor the Luxembourg Stock Exchange.

Nasir also highlighted The LHoFT CATAPULT 3rd cohort which is focused on African Fintechs for financial inclusion.

Catapult: Inclusion Africa 2020

► A-Trader – Tanzania

► A-Trader – Tanzania

► CinetPay – Côte d’Ivoire

► Dundiza – Tanzania

► Esusu – Nigeria

► Eversend – France

► Exuus – Rwanda

► OZÉ – US & Ghana

► PaddyCover – Nigeria

► People’s Pension Trust – Ghana

► Pezesha – Kenya

► SmartTeller – Nigeria

► SympliFi – United Kingdom

► uKheshe – South Africa & UK.

Zooming out of Luxembourg as a Fintech ecosystem

Nasir`s tweet from last week about the persistent use of Fax machines in financial services, highlights that it is difficult to Break the network effects that are ingrained in financial services. Calastone confirms the challenges from the use of fax machines in fund distribution, during this global abruptly forces shift to remote working.

The Global Fax market is growing. Part of it is on the Cloud but a significant part of it stubbornly uses standalone fax machines. Business workflows are networks that cannot be easily Broken. If your supplier, or customer, or service provider uses-requires a Fax, you will too. Breaking those networks is very hard. If we don’t manage to get rid of fax machines during this crisis, when will we?

A 2017 IDC report on the Fax market showed that 36% of fax volume (monthly pages) was sent or received using standalone fax machines, which is more than the fax volume sent or received using all other fax technologies.

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The same report showed how the West (naturally) has Fax networks that stronger and more difficult to break. In North America, for example, 88% of respondents expect fax usage to grow or remain steady.

Screen Shot 2020-04-06 at 11.26.47

Finance is not as bad as manufacturing in terms projected usage of Fax. However, a 20% increases was projected.

Screen Shot 2020-04-06 at 11.28.37

The top reasons of usage and expected growth of usage are that

  • Fax is an integral part of workflow – Networks
  • Fax is evolving and integrateable with email – Digitalization
  • Fax is secure, compliant and with a verifiable receipt – Compliance, Traceability

Culture eats software. While innovations in Regtech and Blockchain for Capital markets are advancing, those pushing these innovations are challenged by a financial world that uses Faxes for trade confirmations of all sorts of assets, fo receiving mortgage and all kinds of loan applications, processing claim forms in insurance etc.

Breaking business flow networks that operate in a certain way, is difficult.

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Could Bitcoin on DeFi displace banks? Yes.

 

tbtc_bridgeDecentralized Finance (DeFi) is building a new financial system. The DeFi movement is picking up steam. DeFi has been successful in remittances, loans, stable coins, and other core elements of the fiat world. With a little over a year under its belt, DeFi hit a major milestone a couple of months ago, with more than $1 billion in value locked in the DeFi markets. Bitcoin (BTC) dominates the cryptocurrency market, its 8x bigger than the Ethereum, the second cryptocurrency by market cap, but Bitcoin doesn’t have Ethereum’s sophisticated on-chain lending, derivatives, trading capabilities . While there are already several centralized BTC lending platforms like BlockFi/Nexo/Celsius. Bitcoin DeFi has been a dream for Bitcoiners. Maybe the dream is over and new tBTC project will bring Bitcoin to the DeFi world. Maybe it will do a lot more than that!

Bitcoin could greatly transform DeFi and that is exactly what the team behind the Keep protocol understands. They recently raised $7.7 million, led by Paradigm Capital and other companies including Fenbushi Capital and Collaborative Funds, to launch a trustless platform for creating Bitcoin-backed tBTC tokens, on Ethereum. The tBTC platform extends on multiple concepts like Multisig custody, SPV, and MakerDAO’s bonding system to build a decentralized Bitcoin peg, better than anything else we’ve already seen.

The tBTC token is an ERC-20 token fully backed by BTC that allows people to safely use BTC on the Ethereum blockchain. The tBTC is a 1:1 Bitcoin-backed ERC-20 token. This means that if you have 1 tBTC, you can redeem it for 1 BTC. The new tBTC token combines the strengths of both chains, and offers BTC holders a way to spend their BTC on Ethereum.

To spend Bitcoin, users have to deposit BTC into a threshold signature contract. Once the deposit has been made, the “signers” submit a proof of deposit to the Ethereum network, and then a tBTC token is created and transferred to the BTC holder’s Ethereum (ETH) wallet.

To process transactions, tBTC uses a system of “signers”. Signers operate in groups of three, reducing risk and eliminating trusted middlemen, to ensure transaction safely and transparency. All three signers must approve a transaction. The network incentivizes signers for their role, with a micro fee of 20 basis points (bps) for every tBTC “minted” in exchange for a BTC.

But, Bitcoin on Ethereum is nothing new.

In the past we’ve seen other Ethereum-based tokens pegged to Bitcoin, the most notable being wBTC, an ERC-20 token created by BitGo. tBTC is unique from its competitors, because it offers a redemption feature for Bitcoin, something not offered by other projects.

What impact will a Bitcoin pegged token on DeFi have on crypto and the world?

DeFi scales with Ethereum, but imagine what will happen once DeFi has access to Bitcoin’s liquidity. Ethereum is the home for protocols, like MakerDAO, Compound, and Uniswap. Bitcoin’s hard money features make it fantastic for collateral. Using BTC within these protocols will instantaneously bring more liquidity and let Bitcoin holders access a variety of new services.

Bitcoin is synonymous with crypto. When people thing of Bitcoin they think of crypto and vice versa. With Bitcoin being a strong store of value, it will become far more easier for non-crypto holders to join crypto and earn interest with their Bitcoins or get a loan.

What does that mean? For starters, the price of BTC will go up, sky high!

Being able to use Bitcoins for more things, beyond speculation, will increase demand for BTC and as a consequence its price. It will also limit its supply. Circulating Bitcoins will become harder to find, since people will have the option to keep them locked and make passive returns.

With the Bitcoin’s halving approaching and Ethereum 2.0 being deployed, the value of Bitcoin will rise and Ethereum’s use will grow exponentially.

But what this really means is that Bitcoin on DeFi can potentially displace the existing financial systems. By the time we recover from the coronavirus, we will be able to opt-out of the existing financial system and find the liquidity, cash flow, loans and everything else we’ve come to expect from banks, from the crypto world.

Ilias Louis Hatzis is the Founder at Mercato Blockchain Corporation AG and a weekly columnist at DailyFintech.com.

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6 technology silver linings in the dark Coronavirus cloud

6 positive impacts from Coronavirus enabled by technology .001

It is human nature to seek a silver lining in what is obviously a very dark cloud.

This is the third in our series on how Coronavirus is changing our world. The first looked at how this is crashing legacy financial markets. This was the destructive part of creative destruction. The second in the series was a hopium dream of a positive post Coronavirus future in general terms – not business as usual but better. Now we turn to some specific positive impacts from Coronavirus enabled by technology.

Futurology warning – the direction of travel is clear, the speed of travel is much harder to figure out ie don’t ask me when this will happen.

1. Faster/cheaper drug development. 

The problem: new drugs costs $2.6 billion to develop, so they have to be sold at a high price. Worse for people who need help now is that it takes 10 years when 10 months is too long.

The pieces of the puzzle to create a solution to this have been around a long time – the Internet to share research, generic drug vendors, open source, genome data. 

We need what Linux did to software to happen to medicine.

The desire for that and the pieces of the puzzle are there. The bug from Wuhan brings us two catalysts for positive change:

  • Urgent need from billions of people. If you have a vaccine or a cure that works, finding customers will be easy.

 

  • Political pressure to create economically viable solutions in months not years. The big cost in money and time is in proving that it works and is safe ie in the trials phase.Think of the motivation of people who work for regulators such as the FDA. There is every motivation to slow down the process; releasing a dangerous drug is very bad for your career. Now those same people have to weigh the cost of doing nothing – which could be equally career damaging.

In the past we had diseases that impacted lots of poor people that the market ignored or diseases that impacted a few rich people with little political clout to put pressure on the regulators. Bill Gates famously pointed out the market failure of more budget going towards curing male baldness than malaria. Coronavirus impacts everybody, rich and poor alike, so there is both cash to fund development and political incentive to speed up trials.

Faster/cheaper drug development is a natural for new technology such as Security Tokens that democratise investing (see point 6). Imagine somebody on a clinical trial seeing many people starting to get better and asking “I wonder if I can buy a stake in the company that makes this drug?”

2. Better air quality

The images from space showing reduction in pollution in places like Wuhan and Italy are inspiring. Clearly factories will restart and planes will carry passengers again, so this maybe just a temporary halt to destroying our planet.  However there is likely to be some behaviour change when people figure out that better air quality improves health and productivity and that it is a talent magnet. You hear this when you speak to foreigners making fortunes in China who want to return home, albeit to less money, because pollution is harming them and their family (and bad health is costing them money as well as ruining their quality of life).

Some people may also change their behaviour because they believe that factories and transport built to run on fossil fuels are driving climate change (some may disagree, but behaviour change does not need everybody to change, just enough people).

The people invested in fossil fuels know this. That is why oil prices are so low, making it hard for renewable energy to compete. This is where technology, specifically Fintech has a big role to play.

Renewable energy that is funded through both Security and Utility Tokens can tip the balance towards renewables. Security Tokens can reduce the cost of capital and Utility Tokens can reduce the cost of marketing. Imagine working with a community to switch over to renewables using a particular supplier and everybody in that  community investing in the Security Token of that supplier.

This the same thing that can enable faster/cheaper drug development.

3. Better decentralized work.

Millions have been forced to work from home by government decree. For many this is a very bad experience. It does not need to be. Some companies have done very well with decentralized working (aka work from home) and have achieved benefits for both the company and the employees.

There are two scenarios for our post Coronavirus world. One scenario is that as soon as the lockdown is over we will return to commuting to work. The other scenario is that some employers and employees will change their behaviour in a way that ushers in a new era of decentralized working.

Many employers are looking at this as a simple cost cutting lever by not renewing office rental leases.

However there are also companies such as Automattic (creators of WordPress) that have operated a decentralized work environment at scale for many years and take a more strategic view that it is about being a talent magnet. As Daily Fintech (which uses WordPress) has also operated a decentralized work environment since inception in 2014, I can vouch for this personally. When looking for talent, location is not a factor we need to consider. Listen to CEO Matt Mullenweg explain how and why they do it.

The obvious play is using/investing in tools to enable communication such as Zoom, Skype, Teams, Slack, Hangouts & WebEx. However it is more about the culture than the technology as Matt Mullenweg explains.

For the employees,  hitting delete on the commute is the easy part. The hard part is: 

  • finding companies with a good decentralized work culture.

 

  • replacing external discipline (what your boss tells you to do) with internal discipline (what you decide is needed to be effective).

 

  • Replacing work relationships with local relationships (family, neighbours etc)

 

4. Digital + Private payments.

Cash payments are less popular due to  coronavirus. Some businesses ban cash payments to protect staff from potential infection risks associated with contaminated cash. Some consumers do this voluntarily, using a card even for small payments, rather than run the risk of infecting the cashier.

With health and safety top of mind we don’t worry about privacy (eg the cops noting I have more than my allotted amount of toilet paper!)

In the ideal world we will get the payments magic quadrant of digital + privacy. Many in the cryptocurrency world are working on that. We are not constrained by technology. The constraint is human inertia. Maybe we don’t care about privacy until it is too late, until an authoritarian government can track and control your every move. That is already true in China.

I am optimist who believes that enough people will choose freedom and that private digital payments will be a key part of their life. The people who care about privacy may be derided as fringe nuts today when the consensus is that it is OK to sacrifice privacy to get security and a better shopping experience, but innovation adoption usually happens first at the edge.   

5. Democratized AI & automation.

There are many reasons why we do not want to go back to business as usual. We want freedom of movement and assembly of course, but we do not want to go to path we were on leading to machines making everything for and decoding everything for us.

AI & automation can be good if that power is democratized.  AI & automation can lead to deflation which, despite the scary use of the word, can be a good thing – who does not like prices falling?

AI & automation are not good if they take away our ability to work and get paid and if all the profits go to a handful of people, leading to even greater inequality

What we want is AI As A Service and Robots As A Service, both based on an open source software and open source data. The pieces are in place – open source business models, Internet delivery, civic minded developers willing to donate time to a good cause – so it only takes an entrepreneur to bring these services to market. Then those services can be used in businesses that are funded via Security and Utility Tokens.

6. Democratized investing.

Back in the day, individual investors funded their retirement and kid’s education by actually researching the fundamentals of a company.

Some did it spectacularly well, like Warren Buffet, but thousands did the same thing on a much smaller scale, researching the stocks of companies that made products that they liked.

The reality during the everything bubble was that 75% of stock market trades were done by computers. The algorithms look at things like words in a speech by central bankers and sentiment expressed by day traders on Twitter.

The 25% of trading done by humans is mostly done by Hedge Funds which means that investors pay 2 and 20 (2% of funds under management and 20% of the capital gains aka profit) for the privilege of human judgement.

Patient investing in individual publicly listed stocks only makes sense when valuations are low enough. Post the Coronacrash, prices are low enough. Great profits can be made and here is the secret that the financial services industry does not want you to know. Your competitive advantage comes more from knowing which products are good than from financial expertise. You need some basic financial analysis tools and techniques, but they are simple and many are free or very low cost. What matters more is seeing from your own experience which products are better.  For example look at tools we use from our lockdown location such as Zoom, Skype,  Hangouts and WebEx. Each is owned by a public traded company where you can buy or sell the stock.

Ultra High Net Worth  Individuals (UHNWI) working through their Family Offices are retail investors on steroids. Like JoeQ Public they make their own decisions, they are not intermediaries who are motivated to go with the herd. Unlike JoeQ Public,  each Family Office can deploy a lot of capital.  Family Offices are the decentalized central bankers of the post Coronavirus era, who may lead the investments that will both profit their family and create a better world.

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This Week in Fintech ending 3 April 2020

this week in Fintech .001

This weekly summary from our 5 experts, brings you insights based on their experience as investors, entrepreneurs & executives.

Ilias Hatzis started his first company, an internet search engine, during the dot-com era & now focusses on crypto.

Efi Pylarinou worked for top tier Wall Street firms and is now a top global Fintech influencer.

Jessica Ellerm is CEO of Zuper Superannuation & previously worked for a top Fintech startup, Tyro.

Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners.

Sheldon Freedman is a Fintech lawyer at Hassans International Law Firm

Bernard Lunn is the CEO and Editor of Daily Fintech and author of The Blockchain Economy.

If you want to continue receiving This Week in Fintech, you can either become a paying Member for $143 per year (and receive all our content in addition to this weekly summary) by clicking here.  If you just want to receive This Week in Fintech for free, you will need to fill in this form. Or fill in the same sign up form at the bottom of this post.

Your Editor is Bernard Lunn. He is also the CEO of Daily Fintech and author of The Blockchain Economy.

Monday Ilias Hatzis @iliashatzis our Greece-based crypto entrepreneur (Founder & CEO at Mercato Blockchain Corporation AG and Weekly Columnist at Daily Fintech) wrote Coronavirus will shape the next decade. Will we prep before the next one?

Everywhere people are dying, global lockdown and massive government intervention. The coronavirus pandemic is disrupting global industries and supply chains, causing disastrous problems for businesses, consumers and the global economy. Just like the disease is killing older people at high rates, it is also about to kill mature western economies. Businesses are struggling to produce and distribute products and services, that consumers depend on. The coronavirus outbreak has limited our ability to produce and consume goods. Its financial ramifications are already severe and will only get worse. 

Editor note: Ilias identifies the problem “This is not just a health pandemic, it’s a pandemic of fear and mistrust” and then goes on to look at how Blockchain and IOT  based data networks could provide more trusted data for future pandemics.

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Tuesday Efi Pylarinou @efipm our Swiss-based Fintech Adviser,  founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019 wrote A Buoyant Digital coin at a tender age – Ndau

The Ndau (XND) is a stateless Buoyant digital currency with a built-in design to act as a store of value, is less known as it is not conducive to pump and dump. It was launched 2 yrs ago out of  the Cayman Islands.

It is more actively traded on BitMart exchange with a presence in New York, China, Hong Kong, and Seoul. According to Cointelligence, BitMart is included in the top 20 exchanges by volume.

Editor note: Efi takes an early look at what could be a new stateless digital currency. If it can become both a store of value and a unit of account this will be a very big deal. 

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Wednesday Jessica Ellerm @jessicaellerm, our Australia-based Fintech entrepreneur and thought leader specializing in Small Business and the Gig Economy & CEO/Co-Founder of Zuper, a new superannuation startup in Australia wrote ‘Know Thy Customer’ A Key Trend Going Forward in Fintech Innovation For SMEs

The world is rapidly becoming a very different place and businesses will need to adapt fast to survive. Never has the phrase ‘survival of the fittest’ been so literal, for so many.

Over the coming months (or years?) many businesses will encounter survival pains that would have been unthinkable several months ago. How the fintech community responds to these challenges will also make or break many new startups in this space.

Editor note: Jessica has identified one of those big opportunities coming out of the Coronavirus crisis, which is how small business can make genuine connections with their customers without that lovely old face to face time. Not an easy one, but a big one.

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Thursday Patrick Kelahan @insuranceeleph1, our US based Insurtech expert (a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners who also serves the insurance and Fintech world as the ‘Insurance Elephant’) wrote The best product insurers provide is empathy. It’s been missed in COVID-19 response.

Strategy sessions begin now for the insurance industry- addressing coverage gaps, policy forms, staff utilization, remote working methods, customer engagement, scalability of digital methods, virtual claim adjusting techniques, parametric products, and business interruption cover among others, and the big challenge of the insurance world- systemic risk.

 And the big, big elephant in the room- selling empathy as a key deliverable.

 Outside of health cover being broadened in most countries, there are few COVID-19 positives the insured public have seen recently from the insurance industries, and several negatives.

How to avoid repeating the COVID-19 outcome?  Learning starts now. 

Editor note: Pat raises a risk subject that should be top of the agenda for Insurance Boards – reputation risk.

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Friday  Sheldon Freedman, Fintech lawyer at Hassans International Law Firm

wrote: Security Token news for Week ending 3rd April 2020

Editor note: This weekly snapshot is the news that matters for busy senior people in the Security Token market.

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