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HSBC Becomes the First Bank to Finance Transaction via Hyperledger

Multinational banking giant, HSBC has reportedly become the first bank to complete a financial transaction using the blockchain trade platform, we.trade based in Europe.

Based in Dublin and established in 2017, we.trade is a blockchain trade platform that runs on the IBM Hyperledger Fabric. The platform allows clients to manage, track, and securely open account trade transactions between SMEs in Europe.

The Global Trade Review recently reported that HSBC financed a transaction on the we.trade platform within the second round of pilots that started in June of 2019. The transaction took place between HSBC’s client Beeswift, which was a company that produces protective equipment and their sale to a company in the Netherlands banked by Rabobank.

It was also stated that we.trade has been supported and backed by 12 major shareholders, including banking giants such as Deutsche Bank, Natixis, Rabobank, Santander, and HSBC.

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HSBC Successfully Executes First Blockchain Letter of Credit in Malaysia

HSBC announced its successful execution of a pilot live blockchain letter of credit (LC) transaction in Malaysia on Oct. 14.

The LC was for the import of resin by Malaysia’s Simply Packing from a Singaporean company, as reported by Fintech News Malaysia. HSBC’s Malaysia was the issuing bank, while HSBC Singapore acted as the advising bank.

This pilot aimed to give a demonstration of the use of blockchain LCs for small and medium-sized enterprises. As Simply Packaging is a mid-size firm, this pilot further indicates that LCs can be used by smaller firms rather than solely large corporations.

Shahid Chachia, the Managing Director of Simply Packaging, said, “I believe this will be the mode of issuing LC moving forward as businesses and the governments recognize the safety and swiftness in performing tasks using the blockchain technology.”

As the first pilot blockchain transaction for HSBC Malaysia, globally the eleventh, Fintech News Malaysia stated, “this marks a significant step for Malaysian companies in the digitization of trade.”

Stuart Milne, the CEO of HSBC Malaysia, commented:

“I am very pleased that HSBC has pioneered Malaysia’s first pilot blockchain LC transaction. This showcase our strong commitment and ability to support cross-border trade by Malaysia businesses using cutting-edge technology platforms.”

Previously reported on Blockchain.News, HSBC became the first bank to complete a financial transaction using the blockchain trade platform, we.trade based in Europe.

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Oman Oil & Orpic Group and HSBC Digitize Trade Finance with the Execution of their First Blockchain Trade Transaction

On their 49th National Day, Oman Oil & Orpic Group and HSBC Bank Oman succeeded in carrying out their first trade transaction via blockchain technology. The transaction which according to the report, clarifies in a deeper way the commercial and functional potential of blockchain involved the shipping of polypropylene to Abu Dhabi National Carpet Factory on a blockchain platform advised by HSBC using R3’s Corda system.

Pertaining to this, Sadiq al Lawati, Finance & Strategy Commercial Value Partner in Oman Oil and Orpic Group commented that their blockchain pilot is a great feat in the move in actualising digitisation which began with Artificial Intelligence. Lawati noted that their journey is resolved to continue welcoming new innovative technologies.

As stated in the report, the R3’s Corda system makes use of blockchain technology to trace and trace data between parties. It ensures to keep all stakeholders in sync, speed up transactions and reduce the need for reconciliation while providing visibility on what is happening which increases the confidence of the parties, and thus, makes trade finance more easy-going and straight forward.

Nizar al Lawati, Chief Financial Officer of Oman Oil and Orpic Group said that they are proud to be counted among the first group to embrace such an innovative idea.

“As an integrated Group, we are proud to be among the first in the region taking serious steps in digitizing Trade Finance through exploring Blockchain technology and responding to the 4th Industrial Revolution. This wouldn’t have been possible without the commitment of our team, our customer’s cooperation and the support we received from the Central Bank of Oman and HSBC Oman,” said Nizar al Lawati.

Just like the traditional process, the blockchain LC (letter of credit) allows all participants to a single platform to complete the transaction. However, instead of a space of 5 to 10 days like the traditional process, it does this in 24 hours.

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HSBC Chief Legal Officer Stuart Levey Gets Appointed as Libra’s New CEO, Expert in Dealing with Regulatory Backlash

The Libra Association appointed its first CEO, Stuart Levey, the Chief Legal Officer at HSBC Holdings. Levey will be overseeing the Libra digital currency and payments system and holds a strong compliance track record and is expected to join Libra in the coming months. However, HSBC has not shown the same upright compliance record.

Levey is also expected to “combine technology innovation with robust compliance and regulatory framework.” The Facebook-led project has invited scrutiny from global regulators, with concerns over its threat to national sovereignty with its potential launch. Many of Libra’s original members, including Vodafone, PayPal, and Visa have also chosen to leave the association.

Being a Harvard graduate and having spent more than ten years in the US government departments, Levey served seven years as the Under Secretary of the Treasury for Terrorism and Financial Intelligence during the George W. Bush and Barack Obama administrations.

“Technology provides us with the opportunity to make it easier for individuals and businesses to send and receive money, and to empower more than a billion people who have been left on the sidelines of the financial system, all with robust controls to detect and deter illicit financial activity. I look forward to working closely with governments, regulators, and all of our stakeholders to realize this vision,” said Levey.

HSBC invited Levey onboard to address the scandal HSBC faced after the company was found to have laundered money for a drug cartel in Mexico totaling to $881 million. HSBC was fined for its malpractices for a whopping $1.9 billion.

The digital currency initiative was announced in 2018, which took the world by storm with its controversial project. With the ICO bubble having expanded exponentially in 2017, the public started to become aware of cryptocurrencies. Digital currency and cryptocurrency were still seen in the light of being scandalous, illicit, and unfamiliar.

Taking the regulated road

After surviving months of intense backlash by global regulators, the project had been called to a halt. The Libra Network will no longer be permissionless and will be adding comprehensive anti-money laundering and combatting the financing of terrorism protocols, to be able to enforce sanctions over coins in the network and to be able to handle requests from law enforcement.

Libra has applied for a payment system license from the Swiss Financial Markets Supervisory Authority (FINMA), to be able to allow the Libra payments system to be used publicly. One of the major updates of the Libra whitepaper is that it explicitly mentions the limits of what users are able to do on the network, including balance and transaction limits, and the network would only be accessible to regulated crypto firms in the beginning.

Binance believes Libra could be the SpaceX of the payment industry

Binance took a closer look at Libra’s recent whitepaper update and concluded that Facebook’s project could potentially disrupt the payment industry. Taking into account that the Libra Association recently applied to the Swiss Financial Market Supervisory Authority FINMA for a payment system license, Binance stated that such a payment system may very likely qualify as being “systemically important.” By applying for the payment system license, the Libra payments system would be accessible to the public.

Technology entrepreneur Elon Musk, the founder of SpaceX, was mentioned in the report as an industry leader in the space sector due to its significant step forward in improving speed for rocket journeys.

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DBS Bank Joins R3-Backed Blockchain Trade Finance Network Contour Built on Corda

Singapore’s biggest bank, DBS Bank joined R3-backed Contour Network known for digitalizing global trade processes.

Previously known as Project Voltron, Contour is a blockchain-based trade finance platform, built over R3’s Corda blockchain and was founded by R3 and major global institutions, including HSBC, ING, Standard Chartered, Citi Ventures, BNP Paribas, and Bangkok Bank, Bain & Company, and CryptoBLK. DBS Bank became the first Singaporean bank to join the network.

Project Voltron in May 2018, and the project was concluded as the founding banks have decided that they want to make the project into a real company, not just as an experiment, explained Carl Wegner, CEO of Contour.

Banking giant HSBC previously announced its success with carrying out the first yuan-denominated letter of credit (LC) using the platform in September last year. “Other banks, including Standard Chartered, BNP Paribas, China Trust, Bangkok Bank, RBS, have all done different pilots, and they are working together to understand different components of LCs and the challenges,” Wegner added.

DBS will be utilizing Contour’s digital solutions to provide fully digital end-to-end LC settlement processes, including the transfer of electronic trade and title documents to its customers. The coronavirus pandemic has led a demand for “contact-free” banking solutions which also makes digitalizing rade processes more popular and relevant. This new solution would allow an increase of efficiency in settlement time, reduction of paperwork, and the simplification of trade processes.

John Laurens, Group Head of Global Transaction Services at DBS Bank said, “We’ve been employing technology and digital solutions to innovatively unlock opportunities for our corporate customers across sectors and of all scale. This is more than simply digitizing a historically paper-based service; it’s about transforming the way industries work by providing greater transparency, security, and speed to build sustainable trade ecosystems that are able to weather the peaks and troughs of economic cycles and are resilient in times of crisis.”

In 2019, despite facing an increasingly challenging and uncertain environment, especially the second half of last year, DBS achieved a record performance and successfully launched DBS’ First Fully Virtual Wealth Management Account Opening Solution. Ajay Mathur, the Head of Consumer Banking and Wealth Management at DBS exclusively spoke with Blockchain.News to elaborate on a two-year process to taking the leap into FinTech and roll out virtual banking and wealth management services.

The integration of FinTech into banking services allows the customers at DBS to have full access to our branches with a “phygital” experience providing customers with a more tailored experience as well as a virtual digital banking and wealth management experience.

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IBM Joins Trade Finance Blockchain Platform We.Trade As New Shareholder

IBM has announced a new collaboration with blockchain-based trade finance platform, we.trade to enhance network capabilities and accelerate the global growth of the platform. We.trade was designed to connect buyers, sellers, banks, insurers, and other organizations in a network, simplifying cross-border trading.

We.trade is backed by a group of banks, including Deutsche Bank, HSBC, Rabobank, Santander, UBS, Société Générale, and a few others. As one of the largest blockchain-enabled trade networks in the world, the blockchain platform first aimed to help small and medium-sized enterprises (SMEs) in Europe to get better access to trade finance. With the new partnership with IBM, we.trade is looking to scale globally as it is expanding in Asia, Africa, and Latin America.

Built on the latest version of the IBM Blockchain Platform, IBM has been the platform’s technology partner since the beginning. We.trade was also the first enterprise blockchain consortium to go live back in early 2018.

We.trade automates trade finance processes, including providing traders with access to insurance, credit rating, and logistics services. Jason Kelly, General Manager of Blockchain Services at IBM said, “The strategic direction for we.trade and IBM is focused on driving growth and transparency across the entire trade ecosystem, collaborating to enhance the network effect of blockchain, and expanding access to trade finance and other services to the market place.”

IBM also takes a 7 percent stake in we.trade, amongst the 12 existing shareholders: CaixaBank, Deutsche Bank, Erste Group, HSBC, KBC, Nordea, Rabobank, Santander, Société Générale, UBS, and UniCredit.

During the last few months, with the emergence of the coronavirus pandemic, we.trade has observed the trend of removing paper-heavy processes in trade finance. With a digitized solution, improving access to trade finance will be essential to post-pandemic economic recovery.

“No other distributed ledger-based platform for trade has moved so rapidly to deliver value for member organizations and their customers,” said Ciaran McGowan, CEO of we.trade. “The enthusiasm for this platform underscores the need to continue to invest and expand access to a growing number of organizations.”

HSBC became the first bank to finance transaction via we.trade

The Global Trade Review reported that HSBC financed a transaction on the we.trade platform within the second round of pilots that started in June of 2019. The transaction took place between HSBC’s client Beeswift, which was a company that produces protective equipment and their sale to a company in the Netherlands banked by Rabobank.

Facebook-Backed Association Picks Another Former HSBC Executive as Libra Network's CEO

The Libra Association has appointed former chief executive of HSBC Europe, James Emmett, as the new managing director and CEO of Libra Networks. He will lead Libra’s operating subsidiary tasked with operating and developing the project’s crypto payments system.

Earlier this year, Emmett left HSBC amid a strategy overhaul. He will now join the Libra Network, the Libra Association’s operating subsidiary, as the new CEO and managing director on October 1.

Emmett is a veteran financial service leader with a great wealth of global experience in operations, technology, strategy, and business. He worked at HSBC for 25 years, holding the chief operating officer’s position at the HSBC bank and the chief executive role of HSBC Europe.

Scaling Back Libra To Win Regulatory Approval

In June 2019, Facebook formally introduced the Libra project to the world, unveiling an ambitious vision of an autonomous, decentralized organization to oversee the project and an easy-to-transfer, borderless means of exchange. However, regulators and central banks had fears, claiming that Libra’s original plan for a single coin backed by government debt and various currencies could erode the power and control national sovereignties over money if adopted widely by Facebook’s 2.7 billion active users.

Since announcing an overhaul and formally applying for a Swiss payments license in April, the Libra project started reinforcing its staff with experts from the field of traditional finance. The project has brought in a number of high-level hires, several of them have ties to the U.S government and authorities and have specialized in financial compliance.

In May, Libra appointed Stuart Levey, HSBC’s former chief legal officer, as its CEO to head the Association overseeing the project. Levey was the first Undersecretary for financial and terrorism intelligence at the U.S Department of Treasury. He was one of the only a few high-ranking Bush administration officials asked to remain in his post by the Obama administration.

In April, the Libra Association revamped its white paper and pulled back from its original plans for a single stablecoin backed by a basket of different currencies. Instead, the Association announced scaled-back plans for a cryptocurrency network linked to individual national currencies and overseen by global watchdogs in hopes of winning regulatory approval.

Stuart Levey, a former colleague of Emmett’s at HSBC, mentioned that he is confident that Emmett would assist in making Libra’s vision to become a reality.

Challenges Facing Libra

Libra cryptocurrency is in a delicate phase of its development. Facebook will have to solve some critical challenges before Libra becomes a reality. A digital currency being used by about 2.7 billion people across the world would be a threat to national sovereignties and even disrupt their ability to control money. Some countries are not comfortable with Bitcoin and other cryptocurrencies because of similar threats.

Although cryptocurrency itself is characterized by anonymity, digital platforms that consumers use to make payments would be based on Facebook, Instagram, and WhatsApp. But consumers have not forgotten the breach of trust issues facing Facebook. Therefore, Facebook faces an uphill task to rebuild consumer trust around data privacy.

Lastly, the Libra project is facing stiff competition from CBDCs issued by central banks and other stablecoins like Tether. Libra cryptocurrency appears to have entered a race against time. However, it has the possibility of being linked to Facebook and hence already has 2.7 billion potential users across the world.

Leaked FinCEN Files: $137M Linked to Crypto Ponzi Scam OneCoin Laundered Through Bank of New York Mellon

A leaked trove of US official documents revealed that five major banks – Deutsche Bank, HSBC, JP Morgan, Bank of New York Mellon, and Standard Chartered Bank – were involved in illicit transactions pertaining to mobsters, crypto Ponzi schemes, and money laundering.

The official Financial Crimes Enforcement Network (FinCEN) document was leaked and disclosed that more than two trillion USD had been laundered and flagged as suspicious by financial institutions following the Anti-Money Laundering (AML) act. However, the dirty money was still reported to have been freely flowing through renowned US banking institutions.

BNY Mellon wired millions linked to OneCoin

Among them, one of America’s oldest banks, the Bank of New York Mellon (BNY Mellon) was reported to have wired funds linked to the infamous crypto laundering Ponzi scheme OneCoin.

The banking institution flagged a series of transactions from their branch to FinCEN, as the transactions were deemed suspicious and layered. Layering refers to a money laundering ruse through which the source of funds is concealed through multiple transactions. It is often used by mobsters and criminals to remain undetected by the Financial Crimes Enforcement Network and other financial regulators.

$137 million in transactions wired through BNY Mellon

The funds pinpointed by BNY Mellon were linked to OneCoin, a crypto scam that made the headlines and was classified as a Ponzi scheme generating multimillion funds by US law enforcement agents. The crypto Ponzi scheme was masterminded by Ruja Ignatova, who disappeared to flee arrest.

OneCoin was operational in many countries, such as New Zealand and the US, to name a few, and generated at least $4 billion through cryptocurrency “pyramid schemes,” making it one of the most successful and biggest Ponzi scheme in cryptocurrency history.

According to the leaked report, a combined $137 million was wired thanks to numerous transactions operating through the Bank of New York Mellon. The source of the transactions was reported by the bank to originate from OneCoin perpetrators and agents.

Other banks that were named in the leaked FinCen files include Deutsche Bank, JP Morgan, Standard Chartered Bank, and HSBC.

Deutsche Bank

The Deutsche Bank is alleged to have played a role in moving money worth more than $560 million for a Latin American construction company. It is alleged by US prosecutors to have been subject to foreign bribery. FinCEN has recorded a combined total of $1.3 trillion of suspicious transactions flowing through Deutsche Bank, making it the lead bank of the pack for having the largest suspicious transaction volume.

JP Morgan

JP Morgan was said to have processed at least $514 billion of suspicious transactions. It was said to have been involved in a money-laundering operation involving former Trump campaign manager Paul Manafort, and Bernie Madoff. It is also alleged to have conducted business with a financial Malaysian fugitive and a Venezuelan criminal.

Standard Chartered Bank and HSBC

Standard Chartered Bank was said to have processed illicit transactions amounting to a combined $24 million for foreign mobsters.

Finally, HSBC is alleged to have been in cahoots with Russian mobsters, moving funds amounting to at least $4.5 billion in suspicious transactions. The bank is alleged to have continued its money laundering transactions and to have wired funds linked to a Ponzi Scheme. An HSBC Hong Kong executive has been accused of processing more than $900 million in transactions linked to criminal networks.

Statements from Deutsche Bank and other financial banks have said that the incidents that have come to light in the documents have already been investigated and resolved with Deutsche Bank’s complete cooperation.

Libra Association Appoints Former HSBC Executive Ian Jenkins As CRO and CFO Of Payment Systems

Ian Jenkins, a former HSBC executive is joining Facebook’s Libra cryptocurrency and cross-border payments project as Chief Financial Officer.

Libra Association has announced that it has hired Ian Jenkins as chief risk officer and chief financial officer (CFO) of Libra Networks to oversee a unit tasked with managing the anticipated digital currency’s payment system.

Jenkins, most recently, served as Group General Manager and Head of Business Finance of HSBC, and also has worked at Credit Suisse global financial company and Santander multinational financial services company.

Jenkins said:

“I am excited to join the Libra Networks leadership team at a time when innovation in the financial sector has the potential to empower billions of people worldwide. The Libra project is poised to transform the industry and I am looking forward to being part of this team.”

James Emmett, managing director of Libra Networks, said:

“Ian’s deep expertise in global finance, risk and strategy will be crucial in bringing the Libra vision to life. I look forward to working with Ian as we move forward to a more operational phase of the project.”

Libra Association has appointed many senior executives since submitting its application for a Swiss payment license in April; several of them are specialized in financial compliance and have ties to U.S authorities and government.

In May, the Libra Association appointed HSBC’s former legal chief Stuart Levey, formerly a U.S Treasury official during the Bush and Obama administrations, as CEO of the association itself. In June, Libra project named Credit Suisse’s former head of financial crime compliance Sterling Daines as Chief Compliance Officer of Libra Association. Last month, the association hired former HSBC Europe CEO James Emmett as managing director of Libra Networks.

Libra Project Faces A New Global Opposition

Opposition still seems to continue mounting against the launch of Libra cryptocurrency. On Tuesday, October 13, a draft of the G7 statement announced that the financial leaders of the seven largest economies in the world would oppose the launch of the much-awaited, controversial Libra stablecoin.

In the draft, Central bankers and finance ministers of Italy, Japan, the United States, the United Kingdom, Germany, France, and Canada have said that there would be no launch of stablecoin such as Libra coin and others until proper regulations are put in place. While the G7 statement highlighted that digital payments could potentially remove high costs and inefficiencies and improve access to financial services, such payments services must be properly regulated. The draft said that regulation and supervision are essential to avoid undermining of consumer protection, cybersecurity, privacy, financial stability, and taxation.

Binance Follows Bybit in Appointing Top Compliance Official

Maxwell Baucus, former U.S. senator and ambassador to China, has joined Binance. The top official will become policy advisor and government liaison to the exchange. Given Baucus’s influence in US political circles, the move should support Binance’s expansion efforts within North America, where its Binance US platform operates.

Curiously, news of the appointment comes two days after Bybit revealed a similar appointment, hiring Daniel Lim to lead its legal and compliance team. Lim formerly served as head of legal and compliance for Singapore-based investment bank Daiwa Capital Markets. Two of the world’s largest cryptocurrency exchanges making similar appointments in the same week suggests the market is gravitating towards a more compliant framework as crypto goes mainstream.

Former Chinese Ambassador Joins Binance

Like Binance, Maxwell Baucus maintains close ties with China, where the experienced official served as US ambassador between 2014 and 2017. With a 40-year career prior to that as a senator representing the state of Montana, Baucus has been around the block. Now he’s entering the world of blockchain for the first time, where he will work with Binance’s existing compliance team to facilitate expansion into new territories and approve new products.

Crypto products such as derivatives can only be offered to certain investor groups in some countries. In the US, meanwhile, crypto exchanges must apply for licensing on a state-by-state basis, further complicating the process of obtaining regulatory approval.

While Baucus may be new to crypto, he’s no stranger to financial innovation, and understands the global markets better than most. As a senator, he chaired the Committee on Finance, whose duties included overseeing trade agreements. In a statement, Baucus spoke of crypto having the potential to power “a revolution in how money is managed leading to a fairer and more equitable financial world.”

Bybit Beats Binance to the Punch

Binance’s announcement following hot on the heels of a similar missive from Bybit is likely coincidental, but it’s nevertheless instructive. On March 9, Bybit disclosed the news that Daniel Lim has joined its team, with CEO Ben Zhou explaining that “Daniel will help bolster Bybit’s compliance posture in a fast-changing regulatory environment and sustain our ambition to build trust and provide value for clients around the globe.”

That sounds very similar to what Binance is hoping to achieve through its appointment of Maxwell Baucus. Lim has had an illustrious career of his own, with his role at Daiwa Capital preceded by a decade as senior legal counsel at Dutch bank ABN AMRO. Lim has also worked for HSBC, so has a deep understanding of the banking sector and how it intersects with crypto.

Crypto has come a long way from the wild west days of Mt. Gox, Btc-e, and other first-generation exchanges that lacked suitable fiat onramps, let alone KYC. Back then, the crypto market was so small that regulators could afford to ignore it. Today, crypto has become too large to overlook. Rather than fight it, however, forward-thinking regulators in many countries are choosing to work with crypto exchanges and payment processors, to develop a framework that will support compliance without stifling innovation or neutering crypto’s entire value proposition.

With experienced counsel taking up senior roles in Binance and Bybit respectively, crypto appears to be creeping closer to an era of greater regulatory clarity and broader mainstream acceptance.

Image source: ByBit