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Financial Market Infrastructures Cite Progress, Concerns with Blockchain Technology

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Financial Market Infrastructures (FMIs), which include exchanges, central clearing houses and central securities depositories, are focusing on blockchain or distributed ledger technology (DLT) applications that create cost savings and efficiencies primarily, but some are also pursuing new opportunities, according to a World Federation of Exchanges (WFE) report.

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FMIs, due to the youth of DLT technology, are not certain how fully the technology will fulfill what it promises. They also recognize risks including maintaining security standards across legal and regulatory uncertainty.

FMIs Favor Collaboration

FMIs currently favor collaborative engagement with regulators as the technology’s applicability to capital markets evolves.

WFE teamed with the International Organization of Securities Committees (IOSCO) and the Affiliate Members Consultative Committee in surveying post-trade infrastructures and exchanges, collectively known as FMIs.

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The report is based on responses form 24 FMIs along with an interview with another exchange. The report does not represent the total industry as it is based on input from early movers in the DLT capital markets arena.

The report focused on DLT’s state of play and focus areas, regulatory and legal perspectives, and opportunities, risks and visions of a post-DLT world.

Interest Remains High

The majority of respondents are investigating DLT applicability to their environment or are actively exploring opportunities. Seven of the respondents have allocated budget for DLT initiatives while 13 said they expect to.

Some FMIs are also working with industry groups including the Post-Trade Distributed Ledger Group and The Linux Foundation Hyperledger Project. The first group focuses on grasping common industry standards and regulatory policy relating to the post-trade environment. The second group seeks to create an open source distributed ledger framework and code base to allow users to build industry specific applications to support transactions.

FMIs are examining the following use cases: clearing and settlement, trade matching and confirmation, corporate actions like dividend payments and voting rights, securities issuance, crowd funding, proxy voting, trade registration, regulatory transparency and reporting.

In the more bespoke area, respondents also seek the following DLT provisions: national anti-money laundering and know your client registries, trade finance facilities, asset registration facility, databases on agricultural receivables, and digital assets.

Further Progress Expected

Respondents highlighted efficiency enhancement, risk reduction and cost savings as main reasons for exploring DLT. The technology is seen as allowing for further process automation, reducing the need for authentication and manual reconciliation. It also reduces the time needed to finalize transactions and allows greater system resilience and data integrity.

Regarding settlement and clearing collateral management, respondents see these features bringing better capital efficiency and reducing capital requirements for market participants.
Some believe DLT investments can unlock revenue opportunities by giving access to new service offerings. Others think the efficiencies will impact organizational structure.

Expected Rollout Time Varies

Respondents varied in their expected time to introduce DLT use cases. One respondent has deployed a working blockchain application and is rolling out another. Others are at the proof-of-concept stage while some are in the design and evaluation stage.

Respondents had varying levels of concern about technical challenges and integrating DLT with existing infrastructure.

Respondents agreed on the need to ensure that DLT solutions align with legal and regulatory frameworks. There were several issues under this topic that need clarification, however. They included privacy laws, data governance issues, intellectual property rules, investor protection, and conflict of interest.

Respondents agreed that open dialog about the technology’s evolution is the most important point. All agreed on a collaborative approach.

Long-term, they felt IOSCO could play a role in establishing global standards and ensure the standards do not conflict with other standards, such as those relating to cyber security or data protection.

Barriers To Adoption Cited

Barriers to adoption include vested interest in protecting existing systems, lack of technical skills, uncertainty about the technology, and legal and regulatory issues.

Asked to name potential risks of DLT application to capital markets, respondents cited immaturity of the solution or uncertainty about application to existing processes, such as handling fraud and theft, and how to ensure non-blockchain transactions are reflected on the blockchain.

Most agreed it is possible and likely for non-financial players to take the lead in DLT development. They did not, however, agree non-financial firms are in a position to roll out DLT solutions in capital markets without existing players’ participation. Respondents felt it would happen in collaboration with existing players.

Respondents offered divergent views on whether DLT will fundamentally affect the structure of their industry.

Also read: Report shows banks concern for transaction confidentiality on distributed ledger technology

New Parties’ Roles Uncertain

Respondents also disagreed on the impact of DLT on trusted parties’ roles and the growth of new trusted parties. One respondent noted the process could require fewer intermediaries. Some saw the emergence of trusted third parties to handle the verification function.

Predictions are hard to make at the current time on the scope and scale of DLT’s impact on financial markets and market intermediaries, the report noted.

The number of FMIs exploring and deploying DLT proof of concepts and solutions will increase.

Where some FMIs approach DLT as a competitive advantage, the existing collaborative approach is expected to continue.

The collaboration will include regulators and policy makers that will encourage adoption of proper regulation that will minimize unintended consequences of policy formation. Some have adopted “regulatory sandboxes” for the fintech industry that can include DLT.

In areas where unregulated and non-financial entities lead DLT development, regulators will have to ensure equivalent protections exist.

New Standards Needed

To the extent that regulatory standards are needed, IOSCO can help develop standards.

Potential use cases will continue to evolve as FMIs and others explore beyond current processes for new opportunities.

WFE will continue to facilitate an open dialog between its members about the technology’s evolution.

Featured image from Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.8 stars on average, based on 4 rated postsLester Coleman is a veteran business journalist based in the United States. He has covered the payments industry for several years and is available for writing assignments.




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Altcoins

DragonChain (DRGN): Release the Dragons

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DragonChain (DRGN) was originally developed at Disney in 2015-16 and was later released as open source. DragonChain ICO recently ended and the value has climbed considerably, even though it is still only listed on Etherdelta. The cryptocurrency allows companies to build on a server-less platform with built-in protection of data using popular languages such as Java, Python, Node, and C#.

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DragonChain is building relationships with companies to help them bring their product onto the blockchain. DragonChain is a sleeping giant in that it already worked through 20 or so use cases while in development to tweak the initial implementation of the platform. While some companies struggle to find use cases after they are done with their product, DragonChain has figured out a way to simplify the integration of real business applications onto the blockchain in a secure way.

Underserved industries are the initial target of the DragonChain platform, which includes Wine, Arts, Automotive, Legal and Digital Marketing. Some of these industries are lagging behind for lack of innovation and Dragonchain is bridging the gap. DragonChain is creating a turnkey platform for startups and mature companies to rapidly deploy applications on the blockchain. As one might appreciate, blockchain development can be incredibly complex, is hard to understand and sometimes uses archaic development languages for implementation. DragonChain allows companies to use programming languages they are already familiar with to take advantage of blockchain features.

The Benefits of DRGN:

  • Smart contract integration, which has recently only been available on the Ethereum network.
  • High scalability and faster speed to market, which reduces development costs.
  • Built-in security that is inherent to blockchains.

From an investor standpoint, DragonChain is already light years ahead of a lot of ICOs that are creating platforms. It has an incubator program that will fund startups that will help real-world companies get up and running on the DragonChain platform. Unlike Ethereum, which has mainly become an ICO launch pad, DragonChain is building a platform for existing businesses to be able to build on top of the blockchain. While Ethereum is mainly a platform that is there to build on, Dragonchain is a platform with support.

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The DRGN platform is focused on reaching companies just as much as they are building out the platform itself. This will accelerate platform adoption and business growth while increasing the value of DragonChain. Larger companies are approaching the blockchain with skepticism and reluctance. DragonChain can be the bridge that connects the two. It is very expensive to try and leverage blockchain technology in already existing companies. The DRGN platform attempts to solve this by putting businesses first based on past experience and offering restful interfaces, interoperability with other blockchains, ease of integration, a simplified architecture and more.

Dragons or DRGNs will be utilized by developers and organizations to interact with the DragonChain commercial platform’s products and services. Dragon tokens will also be used to support startups in the DragonFund Incubator providing early access to data and technology as well as first access to purchase tokens for use on the developed platforms.

The DragonChain ICO raised $21,358,506 USD. It has since grown to around three times that level and appears to be expanding more rapidly as time goes on. Once the DRGN token is listed on larger exchanges there will a lot great liquidity. DragonChain has a current value of approximately $60,000,000. This is low for a platform that is already so mature, was originally backed by Disney and has an incredibly capable development team.

Disclaimer: Analyst current invests in Dragonchain.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.9 stars on average, based on 9 rated postsKent Hamilton is a cryptocurrency day trading ninja, specializing in altcoins. Founder of CryptoDayTrader.io




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Bitcoin

Bitcoin’s Offensive Continues as Prices Breach $3,400

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Bitcoin’s value jumped to a new record on Tuesday, a clear indication that the bull market was back in vogue following a month of turmoil.

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$3,000 & Beyond

The virtual currency (BTC/USD) rose 2.4% to $3,468.00 in overnight trading, according to Bitstamp. Before the weekend, the BTC/USD had crossed the $3,000 mark only once.

At current prices, the market value for all bitcoins is more than $57 billion – the highest on record.

While post-fork exuberance shows no signs of fading, traders are reminded that bitcoin’s recent leg up has been accompanied by decreasing volume. In fact, a similar trend has been observed during every leg up from $1,800.

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Zooming out to the 1-day Bollinger Band, the market appears to be overbought. A historical analysis reveals that, more often than not, a puncturing of the Bollinger Band in either direction leads to a broad pullback in the market.

The daily RSI also adds credence to the view that the market is approaching overbought territory.

Bitcoin Cash Trading Well Below Its Peak

Bitcoin’s surge followed the creation of a spin-off digital currency – Bitcoin Cash (BCH) – last week. The newly minted coin spiked above $700.00 on Aug. 2 before a series of volatile moves dragged prices back toward $200.00.

BCH was back above $300 on Tuesday, having gained more than 27%. Its total market is valued at more than $5 billion.

Coinbase Caves to Investor Demand

U.S. cryptocurrency exchange Coinbase has announced that it plans to support BCH as of January 2018. Initially, the exchange said it would not support the new coin, triggering outrage among users and a surge in withdrawals.

A contingency of Coinbase customers also threatened to sue the exchange for not supporting BCH, equating the decision to a brokerage withholding new shares from its investors.

“We are planning to have support for Bitcoin Cash by 1 January 2018, assuming no additional risks emerge during that time,” the leading exchange said on its blog.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 155 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Blockchain

Bulletproof

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Hi Everyone,

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One of the things that’s been bugging me about blockchain technology is another technology that is on the rise just as fast and could possibly make it irrelevant.

Quantum computing is currently under development by some of the biggest tech players in the world. IBM, the NSA, and Google are all working hard to make everything that we know about computers irrelevant within the next decade.

The idea is quite simple, in the world of quantum physics anything is possible. For example, throwing a basketball through a brick wall is not a very probable thing to occur but the odds of it happening are greater than zero.

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In computers, it means rather than making one calculation at a time in a sequential order, a quantum computer could theoretically just calculate all the possibilities at once.

So things like passwords or private keys, for example, could theoretically be reproduced in a matter of moments. This of course, threatens not just Bitcoin but all digital payments, online banking, and virtually all areas of encryption and cyber-security.

Now, we’re still several years away from this becoming a real concern. So now is the right time to start building the infrastructure to protect ourselves against it.

A company called Droplex, who’s pre-ICO is just entering its final hour aims to build a bullet proof blockchain that will be impervious to future Q-hackers. Now, I haven’t personally looked too deep at this project as of yet but I am extremely comforted by the fact that somebody is building a fix for this already.

Perhaps in 5 years or so we can have another debate about the best way to upgrade Bitcoin for Q-safety.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

Stocks are down

Bezos Briefly Best

August 1st BTC Deadline

Please note: All data, figures & graphs are valid as of July 28th. All trading carries risk. Only risk capital you can afford to lose.

Market Overview

Problems pursue in Washington for the precarious President.

The newly appointed communications director Anthony Scaramucci is now taking swipes at the chief of staff and Trump himself has been lashing out at his own attorney general Jeff Sessions.

Some speculate that Trump is getting ready to fire Sessions in order to get the special prosecutor Robert Muller off his back.

Meanwhile, the bill to repeal Obamacare was just shot down in the Senate as the notable Republican and previous presidential candidate (2008) John Mccain voted no.

Stock markets have not been performing well so far in Asia and the European markets just opened with a notable gap down.

At least the USD seems to be getting some support.

This chart showing USDollar support was posted by @4exPirate Dawid Kowalski in Poland who is arguably one of the most consistent traders on the eToro network.

Congratulations to Jeff Bezos

…for briefly becoming the world’s richest person. Jeff managed to snag the top spot off Bill and kept it for almost 3.5 hours.

Most of Bezos’ fortune is in Amazon shares, so when the market opened with a significant gap up his net worth reached $90 Billion. However, a sour earnings report from Amazon sent the stock back down.

Turbulence in Crypto

If he times it right, Bezos may just be able to buy all of the cryptocurrencies currently in circulation, which is now holding steady at about $90 Billion.

Or not, the sale of 17% of all AMZN shares along with word that the founder is selling would probably push the price significantly down before he could offload most of them. Of course, that much buying pressure would also move the cryptos up.

In any case, if anybody were considering to buy that many digital assets they might want to wait until next week. Given that August 1st is coming up this Tuesday and still nobody really knows what’s about to happen to Bitcoin.

For those of you looking to trade this event, make sure to get your orders in as early as possible as there may be some downtime on BTC depending on the way it plays out.

Wishing you and yours a very pleasant weekend.

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

Featured image from Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 31 rated postsSenior Market Analyst at Etoro.com.




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