Tag: cryptocurrency

Facebook Plans to Become World’s Biggest Central Bank?

Posted on by Colette Mangion

Published on Medium

According to The New York Times (NYT), Facebook is creating its own cryptocurrency. It would be used on WhatsApp, which Facebook owns, to facilitate transactions between users.

Facebook’s move is clearly to counter the threat from up and coming messenging rivals Telegram and Signal. NYT said that the Facebook secret effort to build its own cryptocurrency “started last year after Telegram raised an eye-popping $1.7 billion to fund its cryptocurrency project”.

Between Messenger, WhatsApp and Instagram, which Facebook owns, there are a collective 2.7 billion users. If Facebook decides to back the value of its own digital with a basket of foreign currencies, then it could potentially become the largest central bank in the world — because that’s what central banks do; print money backed by a basket of foreign currency reserves.

Not only will this become monumental in world economic history, it is also going to become a serious and rapid threat for the existing giants of the finance industry.

Bye bye Visa and MasterCard

The two largest credit card companies in the world are Visa and MasterCard. They provide us with the ability to transact without carrying cash. They then settle those transactions with our banks.

If Facebook issued its own digital currency, and all its users had a Facebook mobile wallet with Facebook coins in it, then the need for credit cards will diminish more and more.

You make a purchase online, you pay for it with Facebook coins. Many apps have already integrated user sign-in with Facebook accounts. Payment is just another step away.

You buy a latte at Starbucks, you tap your phone at the counter to pay with Facebook coins instead of Apple Pay or Google Wallet. Facebook will definitely roll out marketing incentives for users to pay with their Facebook mobile wallets at the point of purchase. This is how existing mobile wallets battle it out for market share.

And if Facebook is backing the conversion value of its coins with real world money, few would see the need to convert the Facebook coins in and out of their Facebook mobile wallets frequently.

But why would you buy Facebook coins to deposit into your mobile wallet in the first place? Because of e-commerce.

E-Commerce F.0

When Facebook coins launch, it could bring e-commerce to a whole new level.

Facebook will achieve its dream of online merchants being able to post and sell items directly within its apps, down to the payment process. No more typing in credit card or PayPal account details. Online shopping will become a two-step process in Facebook apps. I see, I like, I click buy, I hit confirm. Facebook coins move from my mobile wallet to the seller immediately.

There will be no exchange rate spreads and far lower transaction fees. Social networks, instant messaging and e-commerce will become truly integrated. Consumers will come to expect the convenience of two-click transactions. Existing e-commerce platforms using traditional payment gateways will have to adapt to compete.

Note: The above scenarios has been the case in China with WeChat wallet and Alipay for many years now.

Facebook becomes the biggest currency in the world

The NYT report said that, “ The Facebook project is far enough along that the social networking giant has held conversations with cryptocurrency exchanges about selling the Facebook coin to consumers.”

This could potentially create the biggest private currency exchange market in the world. The world’s population is about 7.7 billion people. China is the most populous country in the world at 1.4 billion. WhatsApp alone has 1.5 billion users. Put Facebook Messenger and Instagram into the equation, no other currency has anything close to a potential user base of 2.7 billion. That’s what the Facebook coin could become — the most held and used currency in the world!

It will spawn a foreign exchange market the size of which the world has never seen. Facebook could potentially become more powerful than any other central bank.

At the same time, as Facebook coins become more and more frequently traded by users, a market for Facebook coin derivatives will emerge — Facebook coin futures, forward contracts, options, interest rate swaps etc.

Facebook the next Silk Road?

The NYT article also said, “The big question facing Facebook is how much control it would retain over the digital coin. Working with cryptocurrency exchanges would take at least some of the regulatory burden off Facebook…but..it will be harder for the company to make money from transaction fees and easier for criminals to use the coin for illegal purposes.”

Facebook faces a real dilemma here. It has gotten a lot of public backlash for selling user data in recent years. But if it swings to the other extreme and guarantees absolute privacy like rivals Telegram and Signal, then it could potentially become another Silk Road, the Internet black market that first popularized Bitcoin when users started using it to buy and sell drugs.

NYT says Facebook coins could be issued as early as the first half of this year. The world will know the answers to the above scenarios soon.

As for me, I’m betting on something big to happen with cryptocurrencies. Investment bank JPMorgan is also issuing its own digital coin, but only for the institutional payments market. I’ve noticed that the last two times JPMorgan championed a new solution, that innovation goes mainstream, but not before it causes a crisis…

PKF launches The BITPOD-an Innovation marvel.

Posted on by Colette Mangion

Author: Dr. Marilyn Formosa
Published on: The Commercial Courier

 

The BITPOD, which will function as a quasi-lab, will comprise a live project dedicated to fuelling research and development with a special accent on the emerging fusion between technology and the financial world as we know it.

It goes without saying that distributed ledger technology and virtual financial assets will play an important role in the experiment which promises a publication by the end of the year to be made available to the public in a compilation of the findings, observations, conclusions and results.

Complimentary to the BITPOD will be the BITBLOCK Sessions which will present a series of ad hoc working sessions in a casual format, once again aimed at provoking thought, ideas and novel discussion with local as well as international patronage.

The importance of honing and harvesting research and development locally, and attracting the same from the international forum, cannot be stressed enough, especially in light of our national ambition to service a centre of excellence, within the advancing realms of robotics, AI and all forms of revolutionary living.

As a nation we certainly have the intention and now we are also armed with the legislation, but we still have a long way to go before we can confidently say that we have secured the coveted working ecosystem.

We commend the good work and investment being done by Government and encourage the private sector, to like ourselves, follow suit on this remarkable journey that promises to make its mark an indelible one.

Dr Marilyn Formosa
Head of Legal – PKF Malta
marilyn.formosa@pkfmalta.com

BitPod Centre
35, Mannarino Road, Birkirkara, BKR 9080
+356 2148 4373 I 2149 3041 I info@pkfmalta.com

Cryptocurrencies, robotics and AI will dominate 2019

Posted on by Colette Mangion

Author: George Mangion
Published on Malta Today 14 January 2019

Malta just about climbed the hill of blockchain and must now scale the mountain of AI, a sector in which US tech giants pour billions of dollars in research and development.

Last year, the government was advised to take the bull by the horns and with the assistance of technical advisers rushed the Malta Digital Innovation Act together with a framework for virtual financial assets.

This was pioneering work, hoping that Malta will succeed (as it did in the remote gaming sphere) to be a leader in blockchain and its offspring,  the cryptocurrency regime.

Some say that Malta has taken the bull by the horns and plunged ahead in the sensitive area of virtual currency trading when virtual currencies were at their peak (Bitcoin peaked at $20,236) even though larger countries such as China, India, and EU countries were banning it. But of course, it is all a matter of the early bird catches the worm.

This year, while Bitcoin is making a shaky climb closer to $4,000, the entire industry of cryptocurrency is still reeling from hitting relative new lows. Since the start of the year, the number one cryptocurrency by market capitalisation is down nearly 80% since peaking in December 2017.

For some, the falling price of Bitcoin has raised the alarm and led to widespread selling out. This spurs negativity and a soured mood towards crypto and blockchain-based assets.

Yet hope springs eternal, since, at a recent Crypto Summit held in London by Bloomberg, panel speakers seemed to suggest that, while there’s no denying the immediate outlook for cryptocurrency is shaky, the industry is just experiencing a temporary setback. They hope it will eventually see a rally in the market this year.

Speaking on the panel, Chief Investment Officer at CCL Investment Management James Bevan gave hope to investors who have continued to stick with crypto through the falling market year.

This view was confirmed by Changpeng Zhao (CZ), the CEO of Binance. In his opinion, the market for cryptocurrencies has a promising future, and the year 2018 was merely a correction after the excessive growth that occurred during 2017. In particular, the strategy and business philosophy sustaining Binance have not changed at all; in fact, CZ noted that the company’s expansion plans are now more aggressive and structured, offering more services to a larger public.

Binance not only focuses on the use of current technologies but is also working to build a better future by investing in start-ups that do not have the necessary resources to begin but have great potential to help the ecosystem in the future. Given the level of innovation, security and digital functionality instilled by the technology of cryptocurrency, the industry as a whole has established a precedent pointing that the way forward for 2019 is more innovation and research.

Malta just about climbed the hill of blockchain and must now try scaling the mountain of AI, a sector in which US tech giants pour billions of dollars annually in research and development.

Quoting Forbes, it remarks that prospects for sustaining global competitiveness are now directly tied to the industrialisation of AI. AI and machine learning are predicted to reshape manufacturing, energy, transportation, and financial management. Countries that can successfully cultivate a culture of disruptive innovation will be strategically positioned to lead in the 21st century.

Alongside traditional manufacturing, the world is seeing a rising wave of innovation that has the capacity to transform existing markets and value networks. In particular, consider the application of approaches from big data, machine learning, and AI. All these forces have the power to process, analyse and utilise this data with the potential to transform healthcare, addressing major global challenges in the prevention, detection, and diagnosis of disease.

By contrast, governments that resist AI will find themselves facing a daunting future. It is welcoming to note that the EU has developed a funding initiative to help SMEs in the field of robotics and innovation. The funding is capped at €200,000 per each successful application and is part of the Horizon 2020 research and innovation programme.

Mindful of the legal and technical minefield that lay ahead, the MFSA called for experts to help design and draft parameters leading to a safe framework and good governance to face such challenges. It is an open secret that government is keen to be seen helping innovation and would like to see Malta becoming a jurisdiction that attracts talent from all over the world.

But readers may ask how can Bitcoin become mainstream unless fintech is attracted as well. We have just lost three private banks that closed last year and no effort should be spared to attract more members to the banking community. It is always a case that banks and monetary institutions are wary of challenges set by virtual currencies but like the internet, which was resisted in its early days, the DLT revolution is here to stay. Just ponder how, since we left the gold standard, central banks run billions of transactions in fiat currency which are not backed by any intrinsic value, yet we blindly trust such paper currency.

We know that following a process of quantitative easing practised in the EU and US, this has seen the printing of billions of paper currency by central banks to calm the markets and wipe off excess liquidity. Holders of fiat currency hold no qualms to trust in its exchange value. How does blockchain technology try to solve this dilemma? The answer is blockchain deciphers the trust issue.

It is undoubtedly true that last year, cryptocurrencies have had a very volatile history so caution among investors has set in. But we cannot stand and wait for the next rally. It is encouraging to see Prime Minister Joseph Muscat, at his year-end greetings, wax lyrical about Malta wanting to jump-start the process to regulate ostentatious topics such as research within AI and the Internet of Things, in an all-encompassing regulatory framework. This way the unassailable vision of a progressive Malta will become a reality and the entire island gains.

George Mangion

Author: George Mangion
Published on Malta Today 14 January 2019
Get in touch: info@pkfmalta.com | +356 21 493 041

A Blockchain marvel discovers Malta’s solid regulations

Posted on by Colette Mangion

Author: George Mangion
Published on Malta Today 7th December 2018

Having all data in Blockchain may close doors for certain professions but proudly open vacancies for cybercrime busters even though in theory hackers cannot access data through a central point of vulnerability, on the understanding that Blockchain networks are nearly impenetrable.

With the onset of Blockchain technology, there is disruption. Soon, the world will greet a proliferation of Artificial Intelligence which empowers robotics, machine-learning and Blockchain systems that make verification by auditors and registration of certain traditional contracts redundant.

Readers may be jolted by this assertion and think that this prediction is nothing but scare-mongering. Yet, the way Blockchain technology is structured is said to revolutionise the method how records are kept and maintained.

Naturally, having all data in Blockchain may close doors for certain professions but proudly open vacancies for cybercrime busters even though in theory hackers cannot access data through a central point of vulnerability, on the understanding that Blockchain networks are nearly impenetrable. This may be the case, yet the concentration of data in distributed centres attracts cybercrime.  Cybercrime’s footprint is increasing each year both in its sophistication and frequency.

Traditional defence strategies such as hardening of firewalls and intrusion prevention systems are no longer sufficient. Away from the curse of cybercrime and its nucleus of nefarious hackers, let us focus on the positive side.

The onset of Artificial Intelligence (A.I) coupled with the power of machine-learning will open new horizons in the next decade. There is no denying that it is a complex and ever-changing technological context. This interaction will be highly productive in creating new business opportunities which will be baptising the fourth Industrial revolution.

One may question why the fuss about Blockchain. Certainly A.I techniques are not new, although we are hearing about them as they are becoming more mainstream. Following the birth of the internet, twenty years ago we have seen and waited quietly for the next miracle in business development. It has arrived with the debut of Blockchain and its derivatives nine years ago. Many are purporting this to be the next miracle since the design of the ubiquitous steam-engine.

Taking the bull by the horns, Malta was quick to embrace the revolution and has promulgated laws to regulate it. But the ecosystem is still in the initial stages. For Malta, the drive for diversification of economic pillars is a good thing but this quest needs to be fully funded and supported by stakeholders. Obviously, to do this we cannot gild the lily and expect the green shoots to appear after the first rain.

The MFSA and FIAU are circulating for consultation with practitioners a tail of rules. These rules place a heavy onus on practitioners before accepting Blockchain clients and hold them responsible as a subject person to report to FIAU any suspicious transaction within three days of its occurrence.

There are other rules reining the governance of VFA agents and issuers, making them fully responsible to monitor clients before they are accepted to vet any business that may potentially lead to money laundering or financing of terrorism. The license fees payable to become an accredited agent or an issuer are not cheap when compared to other jurisdictions.

Making this an exclusive club reflects the way how authorities are raising the bar. Every firm needs at least three officials with a pass in an exam (apparently patronised by Institute of Management in tandem with a law firm – Ganado Associates) as a prerequisite to becoming accredited as a VFA agent.

Last month over 300 candidates sat for the exam but only a small percentage managed to pass. Certainly, starting on a high note will help the authorities shift the chaff from the wheat and avoid the apologetic story when licenses granted to three local banks, ended up being investigated for alleged money-laundering activities.

Another ingredient for the success in this sector is the attraction of technical advisers assisted by a number of crypto-friendly banks. The latter are conspicuous by their absence. Therefore, together with an eminent platform of rules, the government is expected to help in upgrading the levels of computer science and maths in schools.

Quality education is the building block of future generations of IT savvy students. Having raised the legal foundations to regulate Blockchain one must maintain momentum by recruiting more IT staff and A.I experts within the regulators.

Anything less will fail – it is like opening a grand pub with no beer. It goes without saying that more funds are needed to multiply the efforts in our university to research machine and quantum learning. It was a bold step when Malta decided to become a crypto and Blockchain hub in Europe and rightly so, government has sponsored a mega conference – Delta – to help promote this vision.

This has put Malta on the map and attracted the attention of giants such as Binance, Okex, and BitPay.

To help broaden the path for new business PKF Malta visited the headquarters of the Social Good Foundation Inc. in Tokyo, Japan – a company whose ICO raised an impressive $30 million from overseas private institutional investors. This foundation is headed by Soichiro Takaoka. and is using A.I to conduct research in the investment industry.

Simply put, it consists of algorithmic trading in which results are improved by analysing a variety of big data to discover investment targets, such as shares that are likely to increase in value.

The founder of Social Good Foundation says that it aims to become the Amazon or Rakuten of the Blockchain era. Soichiro Takaoka has an impressive biography. Having graduated B.A in Tokyo University, he started his career at Mitsui & Co., Ltd, where he was engaged in Overseas Investment Review, New Business Development, and M&A in the IT business sector.

Soichiro was engaged in overseas investment review, new business launches, and M&A in the information industry sector. He formed the Ayumi Trust Group (formerly the Abraham Group) in 2005. This is an IT media business pioneer, targeting the wealthy class. He then established and managed a Hong Kong securities company licensed under HKSFC (later sold).

Readers may ask, ‘What is the secret of success of Social Good?’ The answer is that it holds funds in reserve so as to maintain the value of the cryptocurrency and establish credibility. The novel idea behind this cryptocurrency is that it allows the holder to receive cashback when shopping at participating stores, part of which is automatically donated to charitable organisations.

The Foundation submitted its business model patent application regarding a cashback system utilising cryptocurrencies in Japan and the United States early this year.

At the end of April, the number of Social Good holders has surpassed 30,000 people worldwide. The image of Social Heart is one of a neutral fund rating organisation; it is positioned to use big data to carefully select superior funds worthy of long-term investment by the wealthy from a huge volume of fund data.

If Malta can lure such mega-asset managers given that it has enticed giants such as Binance, then one augurs that more Blockchain platforms are persuaded to weigh their anchor in our sheltered crypto harbour.

As always, fortune favours the bold.

George Mangion

Author: George Mangion
Published on Malta Today 7 December 2018
Get in touch: info@pkfmalta.com | +356 21 493 041

Exam fever hits virtual currencies practitioners

Posted on by Colette Mangion

Author: George Mangion
Published on Malta Today 13 October 2018

Mindful of the legal and technical minefield that may lay ahead, the MFSA called for experts to help design and draft parameters leading to a safe framework and good governance.

Last week saw three packed halls with young lawyers and finance executives sitting for a two-hour long exam concerning three laws introduced by the government on ICO, DLT Exchanges and cryptocurrency regulation.

Rumour has it that over 300 sat for the exam after attending four introductory public lectures conducted by the MFSA and a number of chosen consultants. The results were announced this week and sadly only a handful passed. This has peeved many practitioners since they were given to understand that licences to agents wishing to introduce virtual currency business were to be limited to those who passed the test. Be that as it may, it shows that there is a strong desire among practitioners to join the lucrative crypto bandwagon.

The government is being advised to take the bull by the horns and with the assistance of technical advisers, it has rushed the Malta Digital Innovation Act together with a framework for virtual financial assets. This is pioneering work hoping that Malta will succeed (as it did in the remote gaming sphere) to be a leader in Blockchain regulation.

Some may say that Malta has struck while the iron is hot and plunged ahead in the sensitive area of virtual currency trading when larger countries such as China, India and EU countries are banning it.

But of course, it is all a matter of who dares wins. Quoting the Prime Minister at a recent speech he gave to thousands of delegates attending the Delta event last week, he wants to jumpstart the process to regulate ostentatious topics such as Artificial intelligence (AI) and the internet of things in an all-encompassing regulatory framework.

Delta Summit is the world’s first government-led (and funded) event promoting Blockchain and bringing together service providers, experts and public entities. Malta just about climbed the hill of Blockchain, now we must try scaling the mountain of AI – a subject into which USA tech giants pour billions of dollars annually in research and development. This may encourage the finance minister at the next budget to scale up the dreary amount of funds allocated for applied research.

Silvio Schembri, parliamentary secretary for innovation, proudly announced that the summit would send a strong message to institutions worldwide. Mindful of the legal and technical minefield that may lay ahead, the MFSA called for experts to help design and draft parameters leading to a safe framework and good governance.

It is an open secret that government is keen to be seen helping innovation and would like to see Malta becoming a jurisdiction that attracts talent from all over the world. Little Malta aspires to become an economic superpower in the Med. But readers may ask how Bitcoin can become mainstream unless Fintech is attracted as well.

Readers still feel confused with the terminology and so to help clarify the jargon one can simplify the myth by describing Blockchain as the track while Bitcoin is the train. It is always a case that banks and monetary institutions are wary of the new challenges of virtual currencies but like the internet which was resisted in its early days, the revolution is here to stay.

Just ponder how since we left the Gold Standard, we have run billions of transactions in fiat currency which are not backed by any intrinsic value yet we trust such paper currency. We know that following a of Quantitative Easing practised in EU and USA has seen the printing of billions of paper currency by Central banks to calm the markets and wipe off excess liquidity. Holders of fiat currency hold no qualms to trust in its exchange value.

If someone asks how Blockchain technology solves this dilemma, the answer is that Blockchain deciphers the trust issue. Typically, we can ask ourselves five questions. These are:  Do we really trust the intermediaries?  Do we trust credit cards? Do we trust the fact that transactions represent real value? Do we trust banks? Do we trust our government?

Without going into the controversy which arises from answers to these questions one can do a reality check by saying that if and when cryptocurrencies become mainstream, then trust peaks. We all heard about Bitcoin, Ethereum and other coin variants which currently form part of a popular framework, yet there will be many others. Let us remind readers that located in Valletta is a company-styled Grand Central, hosting a service office and is fully operational concerning payments in Bitcoin.

This service was recently launched by Ravinder Deol, himself an international producer of cryptocurrency training courses. It is interesting to note how Grand Central being the first of its kind in Malta now offers membership plans to suit different working styles, ranging from a hot desk by the hour to a dedicated co-working desk or private office rented by the month.

In addition to providing members with fully serviced workspaces, Grand Central also has exclusivity in Malta to offer international partnership services. Its website states that thanks to linkup in London it offers guest membership of five business clubs in UK operated by The Brew, providing members with a London base and business community with whom to network. Quoting Iain Harvey, founder of Grand Central, he said: “We are always looking at what extra flexibility we can give our members and this time it’s that we offer payment channels.”

It is undoubtedly true that cryptocurrencies have had a very volatile year but even so Grand Central feels that their flexibility is paying off as membership numbers continue to increase. Banks in Britain and the United States have banned the use of credit cards to buy Bitcoin and other “crypto currencies”, fearing a plunge in their value will leave customers unable to repay their debts.

Here one can mention that Lloyds Banking Group Plc, recently said it would ban its credit card customers from buying crypto currencies, following the lead of JP Morgan Chase & Co and Citigroup. Quoting Joseph F. Borg, VP of Bitmalta, he thinks the technology will also transform banks, whether they like to embrace it or not. In the meantime, there is speculation that a handful of foreign banks are applying to the MFSA for a licence to provide virtual currencies business in the coming months. In this way the unassailable vision of Silvio Schembri will become a reality and the entire island gains.

George Mangion

Author: George Mangion
Published on Malta Today 13 October 2018
Get in touch: info@pkfmalta.com | +356 21 493 041