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South Korean Bank, KB Kookmin, Shares Blockchain Strategy

KB Kookmin, a major South Korean bank is planning to adopt blockchain technology into its internal processes.

As reported by South Korean JoongAng Daily on Monday, the institution recently previewed the multitude of benefits to the financial industry that blockchain technology can provide at a conference dubbed the Enterprise Ethereum and Revolution in Banking Summit. Blockchain benefits included the issuance of digital tokens, funding, custodial services and trading.

In his opening address Hur Yin, CEO of KB Kookmin Bank, acknowledged, “The purpose of the financial service is to deliver valuable offerings to clients,” and, “I believe that the financial sector will be able to provide innovative services through blockchain.”

Staying Ahead of the TechLee Woo-yeol, Chief Information Officer, KB Kookmin, also introduced KB’s ongoing experiment in enabling technology to take the lead in providing financial services. He stated, “We see blockchain as a big wave that will disrupt finance in the future, we need to be ready for the moment when different types of assets turn into tokens, although we don’t know when they will be.”

Speaking further on the need to accelerate the adoption of new technologies, Lee emphasized, “The paradigm is shifting in finance.” He continued, “In the past, [companies] were able to catch up with new technologies, but that won’t be the case in the future unless they are prepared for them.”

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The Fight for Freedom: Bitcoin and Hong Kong Battle Old World Control

The fight for freedom takes on many forms. Financial, speech, right to choose and right to act.

In 2019, we are all part of a very interesting period in history.

People want freedom. More control over their lives and more trust.

Government and banking are two key factors that regulate people’s freedom.

Depending on where you live, you will need to trust different governments. You trust them to be fair. Manage the currency you work each and every day to earn. As well as the right to certain freedoms being given.

Financial Freedom

Money makes the world go around. Money allows us to travel, eat, have shelter and do business. Money is an ever-important tool in dictating which options are open to all of us.

More options equal more freedom

Bitcoin and blockchain were created to aid in this fight. To ensure people control their own finances. No middle man. No bank. Complete control over money. Money that cannot be inflated or printed. Bitcoin is not stable, but it is getting better.

Hong Kong is undergoing a very special change. 1 country 2 systems. At this moment, there is a divide between ideals. A divide between freedoms. All made possible by powerful governments and money.

Capital restriction is well known in China. Citizens are told how they can spend their money. Even where they can spend it. The government controls the people through banking and law. They have a very distinct system. One that comes at a price. That price is control. The government is in control of the people. In control of finance. In control of the country.

Bitcoin is a system that removes control. There can be no central power. Bitcoin is decentralized. Trust is passed to computing. Exactly the same way we trust our self-driving cars. Handing our lives over to a program, that has been made exactly to drive us safely. We trust in technology every day. Every time we take an elevator. Bitcoin is the same. A technology made with complete security to handle our finances. That we control. With access keys. Again, like a car.

Human error is a problem. We all make mistakes. We can be clumsy or just have a bad day. Bitcoin has no bad days. It doesn’t get sick. It doesn’t need a 2-week break. It never shows up late to work. It’s 24/7, 365 days a year.

Technology is the way forward. In finance and the fight for freedom.

Hong Kong and Bitcoin will both face trials before they get what they want. Many battles lie ahead. People in power do not want to lose it. This applies to those in government. As well as those in finance. The Hong Kong movement and Bitcoin movements threaten the power of an old system. Old methods of doing things. Old systems that are powerful. But not always best when we look back in history.

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China Construction Bank Announces Updates of Blockchain Platform After $50B Transacted

One of China’s four largest banks, China Construction Bank (CCB) has officially released the second version of its blockchain platform for trade finance, reaching 360 billion yuan ($50 billion) in cumulative transaction volume.

CCB announced the release of “BCTrade 2.0,” focusing on digitizing trade and financial services between 54 domestic and overseas CCB branches and 40 external organizations. Reported by Xinhua news, these organizations include state-owned banks and foreign banks.

Starting in 2017, CCB’s project claimed to be the first to use blockchain for domestic letters of credit, forfaiting and international factoring. In March this year, CCB announced that the blockchain was responsible for the 200 billion yuan transacted in 2018 with 40 domestic and financial participants involved.

The platform allows trading and financing activities, including accounts receivable and trade financing. Aiming to provide a regulatory system for trade finance and to enable real-time monitoring of financial activities, the second version of the blockchain was publicly announced after having reached 360 billion yuan in transaction volume. Ji Zhihong, the Vice President of CCB said that the “distributed storage, transaction traceability, and non-tamperability” characteristics of blockchain are highly compatible with trade finance.

CCB’s platform is one of many blockchain trade finance initiatives in China. A project collaborated between CITIC and Bank of China announced that it had processed 20 billion yuan ($2.8 billion) with its forfaiting blockchain.

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Bitwala Incorporates CryptoTax for Better Tax Reporting

On Oct. 22, Bitwala, a German Licensed Bitcoin Banking Service App, announced its new integration with CryptoTax, an entity that assists crypto users to adhere to yearly tax declaration deadlines.

Bitwala asserted that crypto tax headaches would become a thing of the past based on the introduction of CryptoTax that is deemed the brand new tax remedy.

The new integration would enable Bitwala users to enclose cryptocurrency statements with their tax reports. This process will be as easy as attaching a PDF-file to an email. Additionally, the banking service offered will be the first-ever to integrate crypto tax reporting solutions to users directly through an app.

Bitwala’s co-founder and CEO/CTO, Benjamin Jones, noted:

“Taxation is a part of life, and cryptocurrencies are not exempted. Both trading gains and losses impact your tax balance, yet most cryptocurrency exchanges fail to provide any tools for proper reporting.”

Bitwala customers in all 31 nations of the European Economic Area (EEA) will enjoy the fully compliant and ready-for-use tax statements for any transaction. Additionally, Swiss and German taxpayers will be availed with country-specific tax reports, whereby all legal requirements will be met.

On the other hand, Bitwala’s CEO, Klaus Himmer, said, “Even tax advisors are struggling with reporting cryptocurrency trades to the tax authorities the right way. With CryptoTax, standardized reports leave no room for ambiguity. Bitwala customers will be the first to benefit from our solution, which makes the taxation of cryptocurrencies as user-friendly as possible.”

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South Korea Intensifies Blockchain in Banking but Rules Out Digital Fiat Currency

Innovation has become decentralized globally, with several countries making significant progress while others have struggled with infrastructure and macroeconomic issues. Several factors like state-of-the-art infrastructure, corporate investment, favorable government’s incentives, and policies, and others affect a country’s perception.

According to MERIC’s new survey, the US continues to dominate in the blockchain innovation landscape by 34%. China becomes the second (26%) as it challenges Europe. The United Kingdom becomes the best in Europe while in Asia, Japan, and South Korea are significant participants in blockchain adoption.

South Korea has ruled out issuing its own digital tokens. The reason for this move is that digital fiats are still far off from what the country wants to be. Meanwhile, the country’s private sector continues intensifying the pace of blockchain in banking.

Now, let’s look at new blockchain paradigms taking shape in South Korea.

South Korea isn’t issuing a digital currency

South Korea’s central bank – the Bank of Korea (BOK) said that it wouldn’t be issuing a digital fiat currency in the near future. The BOK said that there is “almost no need” for digital fiat in the country.

The head of the central bank’s financial service department – Hong Kyung-Sik – mentioned views talked about by other international regulatory bodies that identify that central bank digital currencies (CBDCs) would be most effective in developing countries, and therefore have no place in advanced economies.

He also emphasized that South Korea has an advanced payment and settlement infrastructure like credit card providers and financial settlement networks. Therefore, the country has a broad variety of payment methods available.

Commercial banks embrace blockchain technology

Meanwhile, the South Korea private sector seems to be in too much of a hurry to adopting blockchain-powered solutions in the banking industry.

KT is one of the country’s biggest telecoms. The telecom company has created a smart contract-powered solution and blockchain technology for automated currency exchange tellers, in partnership with a leading commercial bank, IBK. Bellsoft – automated currency exchange machine operator- also is participating in the project.

The parties aim to launch devices next year, and want to install them in shopping malls, hotels, and subway stations across the nation. The machines will provide “preference exchange rates” and will offer 24-hour service. Bellsoft and KT hope that other banks will join the initiative.

The reason for the increased adoption of blockchain among firms is because South Korea softened its stance on cryptocurrency in 2019. Regulators thus adopt more a welcoming approach, which opens the door to potential collaborations between blockchain startups and traditional finance.

Many tech firms like Samsung corporation have adopted blockchain technology. Many big financial institutions have also launched their own cryptocurrencies initiatives.

Banks in the region are creating large blockchain portfolios, with leading banking institutions are making considerable investments in recent months. They are keen to use blockchain technology to speed up transactions and payments and cut costs.

Takeaway

South Korea’s regulatory authorities encourage the adoption of blockchain technology in various sectors. Several firms are already taking advantage of this new technology to drive efficiency and minimize costs. For example, blockchain in banking is on the boom.

But it seems that the regulators have a clear snapshot of how the country should adopt and implement blockchain.

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Why is Blockchain Technology Revolutionizing the Banking and Finance Market?

When blockchain technology was innovated a decade ago, it had high prospects of bringing significant revolution into the banking and finance markets, as we glance back at those budding days of blockchain technology and compare the results now. Indeed it has lived up to anticipations and even delivering more than what was expected.

Blockchain technology comes with more than a handful of benefits to the finance and banking industry. This is why most leading financial enterprises around the world including JP Morgan Chase, America’s largest bank by market capitalization, are keying in on the movement. Some of the benefits it offers include; decentralization, transparency, security (very pertinent), reliability, reduced cost, reduced room for errors, simplicity, traceability, immutability among others.

With these features of blockchain technology, one begins to understand the “whys” and “how” of this tech’s revolutionizing banking and finance markets.

But let’s delve deeper into the reforms blockchain tech has introduced or helped make better so far.

1. Safer Money Transfers and Reduced Risks

Tons and perhaps millions of financial transactions happen every split second across the globe, thus making the financial and banking sector a soft target for fraud, heists and other vulnerabilities. Every banking industry out there, despite extreme security measures, lies at the mercy of diligent hackers who know the ropes of hacking.

This vulnerability in the finance and banking sector can be tied to a centralized system of operation where all financially sensitive information is localized in a specific database. Security is of utmost concern when money is involved, and with a centralized system of operation, that cannot be ultimately guaranteed, hence why blockchain technology is seen as a savior.

Blockchain technology runs on a decentralized database system or simply put, a distributed ledger system so no hacker can earn bragging rights for committing the most legendary cyber heist in the 21st century. With this distributed ledger system, no information is localized, they are distributed and are linked to one another in blocks. Any change in one will affect the rest of them, and a breach can get detected easily – which is highly unlikely given that each block is secured with a cryptographic key.

2. Smart Contracts

Banking, finance and insurance sectors that have adopted would blockchain technology find smart contracts really helpful. Unlike all the complications, procedures and bulky paper works involved in conventional contracts, the smart contracts from blockchain technology are simply automated and runs seamlessly when certain conditions in its programming are met.

This reduces human interference, lengthy processes, intermediaries, a pile of papers, and cluttering. The best part is that it makes the whole process 10 times faster than the conventional method. Concerning insurance, issuance policies make the entire insurance business gulp plenty of valuable time.

In the U.S for instance, processing an insurance claim could take any time from 80days and above with lots of cumbersome processes in those 80+ days. But with blockchain technology, time reduction is not just a relief, but there is increased security, transparency, and traceability for every claim leading to a pay-out.

3. Know Your Customer (KYC) Regulation

It’s mandatory for every financial institution especially in developed and developing regions of the world to comply with the KYC regulation. This is enforced in a bid to check fraudulent transactions, graft, money laundering, and other criminal activities. Basically, this regulation requires banking institutions to know their customers very well as the names imply and upload the KYC data of the said customers to a central database which will be used in the regular checkup of information on the customers to curtail fraud.

Keeping up with these regulations, cost the banks a fortune (up to $500 million). Now that’s just a part of it. The other part is the stress involved in doing it as well as the involvement of a sizable workforce. All these translate to a prolonged process that is capable of consuming ample time which can be invested in something else.

However, blockchain technology takes care of all that stress and financial implications by providing a single digital source of identity information. So, when one customer is verified by a particular bank, other banks and financial institutions can have access to the verified information on that customer reducing the duplication of efforts and the need to go through the process again.

4. Improved Payment Systems

With the traditional method of making payments, when you want to transfer money to someone outside the shores of your country you make use of an intermediary such as PayPal or any Fintech company known to you. This is also applicable in local transfers where you pay through your bank and will inevitably incur a cost because a third party is doing the transfer and standing as the middle man. This process is also vulnerable to cyber theft because, in the process, an eavesdropping hacker might interrupt and steal away the fortune or peanuts as the case may be. One of the significant benefits of the blockchain system is the elimination of third parties making the payment system secure, cost-free and faster.

5. Asset Management

In trade finance, going through the conventional process of managing transactions in the form of assets is a lot more complicated. Paperwork, date and time stamp, mediators, broker-dealers, custodians, all of these characterize the traditional system and makeup one highly complicated process.

All these can translate to some inevitable slip-ups leading to loss of finances and assets. The blockchain can store all these records with a smart asset system digitally and update them in real-time. The smart asset system automates the entire process, and you can track your assets to where ever it is going from where it was taken. With each party being able to access data on the trade, all those fatigue-inducing processes with the conventional style become eliminated.

Conclusion

Given that these features of blockchain technology are beneficial to the banking and financial sectors in numerous ways, it is entirely safe to say that the blockchain innovation has come to stay and will continue to revolutionize these financial sectors in newer ways even as more and more sectors are opting in.

The finance and banking markets are cluttered with too many intermediaries and being sectors that are anchored on money, security is the centerpiece concern. This typifies the adage “too many cooks spoil the broth,” and that’s where the blockchain comes in to simplify things, getting rid of the “many cooks.” With the future in view, the revolution has just begun.

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Will Distributed Ledger Technology and Cryptocurrencies Ever Lead to the Extinction of Banks?

Before banks ever came into existence, humans have always looked for ways to carry out transactions amongst themselves, the infamous barter system as we all know it happened to be the first approach to man’s discovery into the world of transactions. As time went on, we began to evolve by inventing a means of exchange and store of values whose unit would be universal, fungible, easy to carry, amongst other parameters. This change of phase has been going on as a result of the fact that some of the parameters, as mentioned above, haven’t been adequately satisfied with the current means of exchange as it were.

Banking is the word we mostly associate with the deposit and withdrawal of money, but banking goes way beyond this. Banking is a sector of the economy, and according to Investopedia, responsible for holding financial assets, and using it to create more wealth. The concept of banking was first conceived and practicalized in the 14th century, in a city in Italy.

Deloitte, a multi-professional service firm, pointed out that in the last ten years, the global banking systems have become a lot bigger and more profitable than it was before. The total assets of all banks around the world have reached an aggregate of $124 trillion, while their return on assets has stood at a stable 0.9%.

In the world we live in today, virtually every sector of human activities have begun to experience one form of digitization or another, and the banking sector happens to be one of the industries at the forefront of this evolution. As we see faster technological advancement and have the need for money to do more like in the area of remittances, we see that efforts have been made by financial establishments such as PayPal to try to meet some of these demands.

Despite all of these advancements, there are still a lot of uncertainties that the banking sector is facing, as to what the future would be for it, based on the fast changes taking place all over the world. One of the elements causing these changes happens to be the decentralized ledger technology.

Although this technology is still in its infant stage, one of the dominant questions that have been nudging minds of many is whether or not it will make banks go extinct. The answer to this question depends on quite a number of factors, one of the major things that have been responsible for the growth and advancement of any sector is its ability to evolve, same goes for the banking sector.

Initially, cryptocurrencies received a lot of resistance from institutional bodies in more recent times; however, this technology has seen more acceptance. Over time as we see some governments such as the Chinese who has taken a 360-degree turn from totally kicking against cryptocurrencies to launching its own digital currency.

Blockchain and banking

Instead of seeing the technology as a threat, banks would be better off seeing it as a plus. The first integration of blockchain technology in banking started in the areas of payment, i.e. using it as a means of payment, but there are more significant ways apart from payment in which blockchain technology can enhance banking.

The fight against fraud

Blockchain may still be in its early stages, but its significance in the fight against fraud cannot be overemphasized. According to Forbes, 45 percent of financial institutions across the world, like banks and exchanges, are victims of economic crime every year. This is because most off their databases are centralized; once a cybercriminal gets access to any part of their database, they automatically have access to everything. With blockchain technology, it will not just be hard for cybercriminals to perpetuate their systems. Still, it will ensure whoever does so can be traced because every block on the chain is linked to one another, whatever is done to one block shows up on others.

Reduce the cost of KYC

KYC (know your customer) is a practice that most financial institutions have to keep up with, to reduce money laundering and terrorist activity. This practice cost most of them from $500 to $60 million every year. With blockchain technology, the banking systems could easily verify the details of their customers, from other organizations they have been affiliated with, without having to repeat the KYC process.

Smart contracts

When our financial institutions conduct contracts, they rely on the old process of paper and pen, which might not be bad, but is slow and inefficient for this age. Using smart contracts on the blockchain network could prove very efficient in the handling of contracts. All that is required is that both parties program a contract, set the criteria, and execute, once either side fulfills their criteria, the settlement will be instantly be received.

The significance of blockchain technology cannot be overestimated in banking, as banking has to do with the exchange of value- an area in which blockchain is most pliable-, some Banks understand this and have started implementing blockchain in their system.

One of the first was Barclays, a British multinational investment bank that implemented it by creating a blockchain-backed credit, which in effect put them at the forefront of blockchain adoption in the banking industry.

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Goldman Sachs and Citigroup Perform the First Equity Swap on Blockchain

During the launch event, the first live trade data between US giant banks Goldman Sachs and Citigroup were processed on Axoni blockchain. This is the first equity swap transaction on a blockchain built using tools designed for Ethereum.

The launch of the DLT is a multi-year initiative led by Axoni. The distributed ledger infrastructure allows both sides of an equity swap trade to be synchronized throughout the transaction lifecycle, thus communicating changes with each other in real-time.

Blockchain for equity swaps

Traditional equity swaps have to be continuously updated for multiple variables. These include different interest rates, end-of-day market prices, and corporate actions like stock splits and dividend payments.

Furthermore, disagreements happen regularly as each counterparty in trade operates and maintains its own records and books representing the initial trade terms and tracking changes throughout the trade lifecycle. Therefore, the necessary time to complete a transaction requires lots of hours and human resources. With active volumes running in millions per company, which the traditional infrastructure is incapable of handling, there are frequent data breakups between counterparties, thus causing increased operational costs for doing manual reconciliation of records against each other.

Axoni’s blockchain technology can offer the necessary instrument to resolve these time-consuming and costly issues.

Brian Steele, Global Head of Market Solutions at Goldman Sachs said, “Goldman Sachs continues embracing new technology solutions that deliver operational efficiencies and enhance our front-to-back client experience. We are happy to be working with innovative technology firms such as Axoni, and our industry partners to build post-trade solutions that synchronize data and automate business processes on a common infrastructure.”

Puneet Singhvi, Head of Financial Market Infrastructure, and Lead for Digital Assets, Blockchain, and DLT at Citi, mentioned, “This is an important milestone that reinforces our dedication to embracing technology to address real problems encountered by the industry. Using smart contracts, the platform will enable crucial efficiencies while addressing risks in post-trade processing of equity swaps.”

Established in 2013 and based in New York, Axoni specializes in distributed ledger infrastructure. The company has gained major backing from big firms for its work focused on distributed ledger technology. Both Goldman Sachs and Citi are Axoni investors. Wells Fargo, NEX Group, Franklin Templeton Investments, JP Morgan, and HSBC have also all invested in Axoni in the past few years.

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DAG Global Seeks to Break New Ground as First UK Bank to Support Crypto Businesses

DAG Global, a UK financial services company, aims to set a precedent by gaining a UK banking license to close the void between banks and crypto businesses. As reported by the Financial Times on Feb 10, DAG intends to become the UK’s first bank to support cryptocurrency businesses.

Is DAG Global walking a tightrope?

DAG Global revealed that it could resubmit its application for a banking licence in March 2020 as it remains optimistic about offering support to crypto businesses with bank accounts from 2021. The mission will act as a litmus test for the industry as they observe to see whether regulators have reached a new level of maturity regarding digital assets.

Explicitly, companies that deal with cryptocurrencies, such as Bitcoin, have not had rosy relationships with mainstream banks based on their alleged associations with criminal activities like money laundering.

DAG Global, however, seeks to solve this stalemate by making it easier for crypto businesses to access financial and banking services as incredible growth is being witnessed in the crypto space.

Constructive dialogue witnessed

Sean Kiernan, DAG Global CEO, said, “It’s a lack of understanding and reputation risk that has kept others away — we think it can be a cleaner sector [than mainstream finance].”

He also noted that since the bank made its first submission in May 2019, a series of constructive dialogues have taken place with the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA), and UK regulators.

Kiernan revealed that so far, no red flags have been raised by regulators. Nevertheless, DAG Global has had to deal with delays. This is because it had hoped to have gotten the go-ahead of supporting crypto businesses by 2019. This has been primarily triggered by the stringent scrutiny being undertaken by UK regulators.

For instance, both the PRA and FCA have previously warned banks about the dangers associated with crypto businesses. Despite banks not being discouraged by neither to offer services to them, they were asked to be on the lookout to act prudently and maintain effective risk strategies when it came to crypto-assets.

It, therefore, remains a test of time whether DAG Global’s objective of supporting crypto businesses will materialize. Banks are continuously seeking to stamp their authority in the crypto space. For instance, in August 2019, San Diego-based Silvergate Bank contemplated being a crypto lender.

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Wells Fargo Injects $5M into Blockchain Startup Bridging Crypto Exchanges and Banks to Expand in Asia

US Banking Giant, Wells Fargo is investing in blockchain startup focusing on forensics, Elliptic. Wells Fargo Strategic Capital (WFSC), the venture capital arm of the bank, has decided to inject $5 million into Elliptic’s Series B funding round.

The funding from Wells Fargo brings Elliptic’s total series B funding to $28 million, while the firm raised $23 million last September. Investors in the last round include Japan’s SBI Group and the investment branch of Spanish bank Santander, SignalFire, AlbionVC and Octopus Ventures.

The banking giant’s investment into the blockchain startup looks to encourage the latter’s expansion in Asia, to bring additional resources to the firm. Wells Fargo is also looking to accelerate the development of Elliptic Discovery, the compliance product that allows banks to adjust to the risks of crypto transactions.

The problem

Most banking giants have avoided cryptocurrency-related businesses as the risk of dealing with crypto transactions had posed more threats than benefits. Although crypto businesses have been ignored by bigger banks, smaller financial institutions such as US-based Silvergate has risen to the challenge.

The solution: Elliptic Discovery

The product, Elliptic Discovery provides a compliance solution for banks worldwide while collecting profiles of over 200 global cryptocurrency exchanges to allow banks to manage risks associated with crypto transactions.

Based in London, the cryptocurrency compliance firm has been collecting data since 2013 and offers a wide range of identifiers and risk indicators when exposed to crypto transactions through exchanges.

According to James Smith, the CEO and Co-Founder of Elliptic, he explained that the lack of access to the crypto industry has caused “zero-tolerance” towards the new asset class and has caused frustration with customers. Banks have “remained blind to the actual risk posed by their exposure to crypto-assets.”

Wells Fargo Digital Cash

Wells Fargo previously expressed its intention to create a payment network on blockchain, that would be pegged to the US dollar. The bank believes that distributed ledger technology “holds a promise for a variety of use cases.” With the new platform, it would allow the bank to remove barriers to real-time financial interactions across multiple accounts in different marketplaces around the world.

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