Issue 8: Bitcoin Options, Enterprise Blockchain Momentum…and Floyd Mayweather?
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Company Spotlight: LedgerX
Founded: 2013
Description: LedgerX is an institutional trading and clearing platform that in July received approval from the U.S. Commodity Futures Trading Commission (CFTC) to trade and clear options on bitcoin. It is the first federally regulated bitcoin options exchange and clearing house to list and clear fully-collateralized, physically-settled bitcoin options for the institutional market.
Team: Paul Chou (CEO & Co-Founder) // Juthica Chou (President, Chief Risk Officer, & Co-Founder) // Zach Dexter (CTO & Co-Founder) // Shabana Paul (CFO & COO)
Partnerships & Projects
Financial Services
CBOE and Gemini enter into exclusive license agreement to use Gemini’s bitcoin market data | CBOE is the owner of the Chicago Board Option Exchange, the Bats exchange, and the CBOE futures exchange (CFE). Gemini is a New York based, regulated digital asset exchange founded by the Winklevoss twins. Pending approval from the CFTC, CBOE will launch cash settled bitcoin futures on the CFE in 4Q17 or early 2018. “Under the terms of the agreement, CBOE will have a multi-year exclusive global license permitting it to use Gemini’s market data, including Gemini daily bitcoin auction values, in the creation of bitcoin derivatives products for listing and trading.”
The Hong Kong Stock Exchange (HKEX) launching blockchain-based private market exchange in 2018 | The exchange will “provide early stage companies and their investors with a share registration and transfer platform based on blockchain technology so they can conduct pre-IPO financing and other activities on an off-exchange venue not under the regulatory remit of the Securities and Futures Ordinance.”
Coinplug and SBI announce joint remittance venture, ‘SBI Cosmoney’ | “In a statement, Coinplug CEO Ryan Uhr said that the goal of the partnership was to ‘create an overseas remittance service that connects Korea to the world’. Founded in 2013, Coinplug offers a bitcoin exchange, electronic wallet, and online point-of-sales service for Korean users.”
Mastercard wants to enable refunds for cryptocurrency users | There are many issues that have made it difficult for digital currencies to compete with traditional payment methods in various regions of the world. In the U.S. for example, digital currencies are taxed as property, which means even buying a cup of coffee could be a taxable event. Another issue is merchant refunds. Without a mediated process, users need to supply the merchant with their public address which is probably asking too much. In April, BitPay introduced its own refund technology for its merchants to simplify the process.
Russian bank consortium to use Ethereum blockchain platform | Application of the technology is in line with what we’ve seen for many back office processes — digitizing paper-based processes. “Moving the record-keeping of mortgage certificates to a distributed ledger may cut costs by as much as 80 percent, speeding up business by cutting out intermediaries such as public notaries, according to a whitepaper from the association…The banks want to begin commercial application of the system for mortgages by mid-2018.”
Other Industries
Interest in enterprise blockchain from industries other than financial services isn’t showing signs of waning as some predicted. People seem to enjoy a binary view, where either bitcoin is good and enterprise blockchain bad, or vice versa. Why isn’t it possible for both to eventually establish their own use cases but on much different time horizons? Anyone can buy/sell Bitcoin at any time — enterprise blockchain startups must follow the enterprise sales and IT testing cycles. It also requires an organizational shift to become comfortable with decentralized business processes.
It’s likely that the timeline for adoption of a technology that can disrupt structural business processes will take a while (coordination challenges, regulatory barriers, poor understanding of the technology, misaligned incentives, etc). Blockchain hype (“it can solve anything!”) is not useful. But, getting excited about solving legacy (inefficient) business problems, and taking the long view on tackling them, is.
Canada-based media company, Groupe Media TFO, launches blockchain prototype | Groupe Media TFO is an educational media company started by the government of Ontario. The company is hoping blockchain technology will provide many benefits for the industry (broadcasters, producers, rightholders, and other industry participants) including, “A guarantee of trustworthiness for consumption statistics, which are a crucial sales argument during contract negotiations, unalterable traceability for credits and compensation,” and “A reduction of legal fees and the obsolescence of several complex audit processes.” No details yet on who they’re partnering with for this ambitious overhaul.
An Arkansas farming cooperative wants to track chicken shipments with blockchain technology | And they’re working with blockchain startup, Provenance, to do it. “Right now we’re testing Provenance’s technology and its applications with a few of our wholesale customers. Cases of chicken distributed by San Francisco-based Golden Gate Meat Company are labeled with QR codes that link to the story — like this one — of the meat they contain. If this tool proves to add value to our community of conscientious eaters, we’ll integrate it on all our product packages, including those we sell through our ecommerce platform.”
Australia’s largest grain exporter is testing blockchain technology to track oat shipments | Working with Australia based startup, AgriDigital, CBH Group is conducting a pilot to track title transfers and payments of oat shipments as they move through the supply chain. “While it is too early to quantify savings from adopting the technology, they could include reduced back office costs, including removing the need to double enter data at various points along the supply chain, and other efficiencies from establishing a clear train of custody, said Emma Weston, the chief executive of AgriDigital.”
IT firm Fujitsu to commercialize Hyperledger Fabric software | Fujitsu Laboratories has developed its own technology which speeds up transaction processing for Hyperledger Fabric such that the infrastructure could be used for online transaction systems that process over 1,000 transactions per second: “Whereas the previous method could handle 500 transactions per second, Fujitsu Laboratories achieved 1,350 transactions per second using this newly developed technology, an improvement of approximately 2.7 times.” They plan to commercialize this technology in fiscal 2017.
German chemicals company BASF piloting blockchain technology for its supply chain | “The company quietly announced this week that it has been working with blockchain startup Quantoz and IoT startup Ahrma to trial a platform that uses blockchain technology to track the shipment of goods. The project is part of the Startup Autobahn initiative, an automotive industry-focused accelerator that includes support from automaker Daimler, which is itself experimenting with blockchain.”
Blockchain-related patent applications have grown 90% YoY | As we discussed last issue, blockchain related patents are getting popular (again). Coindesk conducted an analysis of patent applications and found that cryptocurrency and blockchain patent applications in the US have almost doubled in 2017. “Data from the US Patent and Trademark Office (USPTO) database, analyzed by CoinDesk, indicates that there were 390 patent applications related broadly to blockchain technology published between January and July of this year. Overall, this represents a 90% increase compared to the same period in 2016…”
Regulation & Policy
LedgerX granted bitcoin options exchange license | This is a big deal! It’s the first license to clear and settle derivatives contracts for digital currencies (and took LedgerX two years to get approval!). What this means for institutional digital currency users is they can now hedge their digital currency exposure with option contracts.
“U.S. Securities Laws May Apply to Offers, Sales, and Trading of Interests in Virtual Organizations” | The SEC finished its investigation of the DAO hack, concluding that DAO tokens (representing ownership in the DAO) were securities subject to (and in violation of) U.S. securities laws. Though they decided not to bring charges, they did issue a clear warning that “U.S. Securities Laws May Apply to Offers, Sales, and Trading of Interests in Virtual Organizations.”
The Monetary Authority of Singapore also issued a warning about digital currencies | The U.S. and Singapore said the same thing really…follow the law! (not legal advice)
Washington State will regulate digital currency exchanges | “The state’s money transmitter laws now apply to exchanges, meaning that they need to obtain a license from the Washington State Department of Financial Institutions and must provide a third-party audit of their data systems… Cryptocurrency exchanges Poloniex and Bitfinex declared that they would would stop serving customers there, citing the new regulations.”
Further Reading
Floyd Mayweather loves ICOs // Blockstack Summit tackles the future of decentralization // Blockchain for Buddhism // State Street executive leaves to found crypto startup // HP’s “mission critical” move into blockchain // Cryptocurrency gurus
Upcoming Events
The Digital Economy Symposium | August 15–16 | D.C. | Buy tickets here
The Symposium will explore how both businesses and tax administrations are reacting to and managing the disruptive effect of new and emerging business models and technology in Asia, the taxation of the digital economy in the post-BEPS world, including indirect taxes on digital services, as well as the use of new technology to transform tax administration.
Digital Economy Symposium | August 15–16 | Singapore | Buy tickets here
The Symposium will explore how both businesses and tax administrations are reacting to and managing the disruptive effect of new and emerging business models and technology in Asia, the taxation of the digital economy in the post-BEPS world, including indirect taxes on digital services, as well as the use of new technology to transform tax administration.
Fintech Week New York | August 21–25 | Buy tickets here
Fintech Week New York is a week-long, content rich event to unite New York’s Fintech ecosystem with a national and international audience. The week is anchored by a series of niche conferences on Blockchain, Capital Markets, Banking/Insurance, and Money/Payments.
DC Blockchain Center: End of Summer Speaker Series | August 23 | Buy tickets here
Please join the Chamber of Digital Commerce at the DC Blockchain Center on August 23, 2017 to hear from our members and industry executives and technologists on the latest industry developments. Space is limited, RSVP ASAP.
Rosenblatt’s 9th Annual Financial Technologies Summit | September 21 | NYC | Email fts@rblt.com for more details
More information coming soon.
9984 SUMMIT: Blockchain Futures for Developers, Enterprises, & Society | October 5–6 | Berlin, Germany | Buy tickets here
This October, IPDB will link 200 leading blockchain developers and enterprises at its inaugural “9984 >> SUMMIT” to exchange insights, tackle challenges, and build a decentralized tomorrow, together with BigchainDB.
Money 20/20 | October 22–25 | Las Vegas | Buy tickets here
Money20/20 organizes the largest global events enabling payments and financial services innovation for connected commerce at the intersection of mobile, retail, marketing services, data and technology.
DCG Tech Summit | October 25–27 | San Francisco | Limited to DCG Connect Members, contact us (network@dcg.co) to learn more!
Our third annual DCG Tech Summit will bring together our global network of founders, investors, and corporate leaders. Our unique blend of presentations, one-on-one meetings, and casual networking create the ideal environment to meet the world’s leading bitcoin and blockchain companies in one day, in one place.
Singapore Fintech Festival | November 13–17 | Buy tickets here
This year, we will be bringing you even more exciting discussions, stimulating demos and insightful debates over the period of 13–17 November 2017. Whether you’re a start-up, technology company, investor, financial institution, research institute or innovation professional, you’ll want to be part of it.
Digital Commodities Summit | November 14 | Buy tickets here
In what will be the first in a series of regional events taking place globally by S&P Global Platts over the coming years, this Summit is designed to look beyond the hype to explore the challenges facing peer-to-peer trade using blockchain. To do so, we are presently sourcing around 20 expert speakers, who will gather to analyze the latest developments, new opportunities and barriers towards using blockchain for traders both now and in future.
