The crypto community got some exciting news this week after the Commodity Futures Trading Commission (CFTC) Chairman stated that Ether (ETH) is a commodity. The news follows similarly worded statements from SEC officials in the past.
The news came via an Oct 10 statement from acting CFTC Chairman Heath Tarbert. In the post, the Chairman announced that he believes Ether is not a security at this time. The news comes at a critical point in Ethereum’s development.
The news is a huge win for the Ethereum community. Currently, Ethereum is the second-largest cryptocurrency in the world by market cap ($20 billion). The ruling is important because it means Ether falls under CFTC regulations and not SEC securities regulations. Consequently, the decision allows financial institutions to offer a wide array of new products and open up entirely new markets moving forward.
Ether Futures and Derivatives
In the past analysts pointed out that the Ether derivatives market suffered due to the lack of transparency. Tarbert now says that you can expect to see both Ether futures and derivatives markets in the very near future. Surprisingly, he stated that these financial tools would hit the market in less than a year.
According to the Chairman, Ether is a case of a transformative token. Basically, the token started as a security during the ICO event. At that time the enterprise was playing a controlling role over the digital asset. As time progressed, the Ethereum enterprise faded to the background as the cryptocurrency decentralized. Now the token serves as a utility.
Additionally, Tarbert described the reverse scenario in which a utility token slowly develops into a security. In this situation, you start off with a fully decentralized organization. Over time, the enterprise steps back in to take more control. Consequently, this creates a scenario where investors seek profits from the efforts of others. Now the token is a security.
Notably, SEC officials stated that they do not consider Ether a security in its current state. However, both the SEC and CFTC did point out that during the company’s ICO, Ether acted as a security. Luckily the SEC declined to fine the Ethereum development team for its ICO.
Bitcoin is a Commodity
Falling along this line of thought, Tarbert explained that Bitcoin is also a commodity. This statement coincides with the SEC’s decision to decline to label Bitcoin as a security. Analysts consider these actions as a precursor to this week’s news.
PoW to PoS
Also, Ethereum developers announced a shift from the Proof-of-Work (PoW) consensus algorithm to a more energy-efficient alternative, a Proof-of-Stake (PoS) consensus mechanism. PoS systems don’t require your PC to do heavy computations. Instead, users earn rewards for “staking” tokens in their wallets. In this manner, PoS tokens use far fewer resources.
Ether Moving Forward
The Ethereum community has much to celebrate moving forward. The cryptocurrency continues to see development across the entire sector. You can expect to see the Ethereum community expand as more ETH-based products enter the market in the coming months.
Knabu to Utilize IdentityMind and Factom in Pilot Program
It was recently announced, in a statement made to CoinDesk, that a trio of blockchain based companies will be taking part in an upcoming pilot program together. Factom, Knabu, and IdentityMind, will each play their respective roles in the pilot, which will test the viability for blockchain as a replacement traditional banking technologies.
In this alliance, Knabu will facilitate the pilot, while records are recorded on the Factom blockchain, with IdentityMind mind performing KYC and KYB checks.
The purpose of the pilot is based upon the elimination of efficiencies inherent to the banking system’s current method of doing things. These inefficiencies arise in the various functions still reliant upon manual completion – such as client onboarding measures, like KYC checks.
Knabu CEO, Gabrielle Patrick told CoinDesk that, “…the average cost of regulatory compliance for a bank is about 30% of its budget…We’re a blockchain-first company and felt that it was necessary to demonstrate the features that can remodel that.”
UK Banking Licence
While this endeavour is simply a pilot, it sheds light upon how Knabu will approach finance if successfully approved as a licenced U.K bank.
Knabu indicates that the goal of becoming a bank stems from, what can only be interpreted as, a shunning of the blockchain and DLT sectors by traditional banks. With companies worldwide involved in these sectors often being denied financial services, Knabu believes that they not only require, but deserve, an advocate that will serve them.
In announcing the launch of this pilot program, representatives from each, Factom and Knabu, took the time to comment. The following is what each had to say on the development discussed here today.
Gabrielle Patrick, CEO of Knabu, stated,
“The purpose of the pilot is to start proving some of the efficiencies that blockchain brings – specifically as core infrastructure for a bank. The average cost of regulatory compliance for a bank is about 30 percent of its budget. We’re a blockchain-first company and felt that it was necessary to demonstrate the features that can remodel that.”
Carl DiClementi, VP of Product at Factom, stated,
“This allows us to be able to borrow the security that you get from the power of the bitcoin and ethereum blockchains to verify that your data is what you claim it to be.”
While the announcement of this pilot program is a very positive development, Factom has experienced negative news this month, as well.
Unfortunately, a large majority of the trading volume for their utility token, FCT or ‘Factoids’, took place on the popular cryptocurrency exchange, Poloniex. This is unfortunate, because it was recently announced by the exchange that they would be ‘spinning-out’ from Boston based, Circle, and that this would see the company cease offering its services for U.S. based clients. This move had a greater effect on FCT than most, as the token is listed on very few exchanges.
While this news was definitely not positive in nature, Factom remains a very interesting, and potential laden company, – as made evident through their continued relationships with government entities such as DHS, large grant programs, and now a, soon-to-be, U.K. based bank.
Operating out of London, Knabu is a blockchain company which was founded in 2017. Above all, the team at Knabu is working to develop services to help ‘bank the unbanked’.
CEO, Gabrielle Patrick, currently oversees company operations.
Founded in 2014, Factom is a ‘blockchain innovations’ company, which maintains operations in Austin, Texas. Since their inception, Factom has managed to establish themselves as an industry fixture. This has been achieved through various impressive achievements over the years, which include partnerships with, not only government entities, but large private companies. Their efforts have also resulted in them being the recipients of high-profile grants, such as that from the Bill and Melinda Gates Foundation.
CEO, Paul Snow, currently oversees company operations.
Based in Palo Alto, California, IdentityMind was founded in 2013. Above all, the company works towards developing, and providing, services aimed towards the prevention of fraud and nefarious activity.
CEO, Garrett Gafke, currently oversees company operations.
Deutsche Bank Bond Tokenized on EOS Blockchain -dBond
This week, the open-source tokenization platform dBond celebrated the successful tokenization of a Deutsche Bank bond on the EOS blockchain. EOS has long been touted as a superior tokenization protocol and the accomplishment is a milestone for the entire EOS camp.
News of the strategy emerged via a dBond medium post. Notably, the post explained the concept was a first in the marketplace. Interestingly, Deutsche Bank had nothing to do with the tokenization. the dBond develop team figured out how to tokenize the bond without the need for the bank’s approval.
The EOS blockchain is the backbone bone of the entire project. In fact, the concept is possible only because the DUSD stable coin and the newly tokenized bonds both utilize EOS’s 4th generation blockchain which features robust smart contract capabilities.
EOS made headlines just this week after developers released the Version 2.0 of the EOSIO protocol. The new protocol improves on the blockchain’s already impressive smart contract programming capabilities. It’s precisely these capabilities that made EOS a wise choice for the bank to consider.
Additionally, EOS recently settled with the SEC to the tune of a $24 million dollar fine for their 2017 ICO in which the company raised $4.1 billion in funding. The SEC alleged that EOS illegally offered securities during the ICO. Now, EOS is fully in line with regulators. In this manner, the platform is now ready to step into the tokenized securities and bond markets.
How it Works
According to the post, an investor purchases a USD-denominated bond. At this point, the new bond deposits into an escrow account. Then, thebondsacc contract requests the creation of an equally valued DUSD nominated tokenized bond. This new tokenized bond is locked up in a thedeposbank account for the required waiting period before a new dBond is issued as DUSD collateral.
Tokenized bond issuance on the EOS blockchain is an important milestone for the firm. Currently, EOS ranks as the #8 cryptocurrency in terms of market cap on CoinMarketCap. The coin has a market cap of $2,659,051,489 (334,977 BTC) with a 24-hour trading volume of $1,673,947,931.
Deutsche Bank Looks Towards the Digital Economy
EOS continues to position its organization to play a pivotal role in the digitization of the economy. When you consider that the EU market is set for a huge expansion in the blockchain financial sectors, both EOS and dBonds is a step ahead of the competition. You can expect to see dBonds expand upon this concept in the coming weeks.
TokenSoft Brings Security Tokens to Tezos
Official Tezos Support
Today, TokenSoft has announced the immediate support for the Tezos blockchain. This means that clients utilizing the digital security issuance services offered by TokenSoft, will have the option of choosing Tezos when minting their tokens.
This support marks a growing trend in which companies are beginning to branch out in their use of issuance blockchains. While many utilize Ethereum, alone, recent months have seen the adoption of varying protocols, including stellar, NEO, and now Tezos.
Points of Note
TokenSoft has noted various attributes of the Tezos blockchain that led to their decision for integrating its support.
- Smart Contracts
- Custom smart contracts, facilitating the minting and distribution of digital securities is supported.
- An oft-noted area in need of growth, the act of custody is addressed by offering its clients access to solutions, eliminating the need for cold storage.
- Key to the issuance of digital securities is the compliance to regulations. Tezos allows for these measures to be implanted with ease.
- The governance model implemented by Tezos will allow for stakeholders to efficiently implement future innovations to the network. This will ensure continued growth and versatility of the protocol.
TokenSoft CEO, Mason Borda, took the time to comment on this development. The following is what he had to say on the matter.
“We first started working with the Tezos blockchain over a year ago, we’re excited to take our services to the next level…With the introduction of the Tezos multi-signature and FA1.2 smart contracts, we now have the key ingredients to provide our institutional grade services on the Tezos blockchain.”
TokenSoft is a San Francisco based company, which was founded in 2017. The goal of the team working at TokenSoft, is to develop solutions supporting the compliant issuance of digital assets on blockchain.
Along their path, TokenSoft has established themselves as a leader, with regards to the digital securities sector. Their suite of services allow for, not only the issuance of digital securities, but their ongoing management as well.
Company operations are currently overseen by CEO, Mason Borda.
Tezos is a blockchain protocol, which is most often associated with billionaire, Tim Draper. The versatility of this ‘self-amending crypto ledger’, has allowed for adoption of the project.
Beyond the aforementioned attributes that led to TokenSoft adopting Tezos, the latter has noted 3 main attributes setting themselves apart from the pack of protocols.
- On chain governance
- Stakeholder input allowed, steering path of protocol development
- Security measures
- Formal verification supported
- Proof of Stake
- Allows for efficient network growth by incentivising transaction validation through rewards
In Other News
Each of the companies discussed here today have found themselves in our newsfeed over the past few months. Here are a couple of articles demonstrating the progress they have made as of late, with regards to digital securities.