Microsoft Japan Among 34 Tech Firms to Launch Blockchain Consortium

UPDATE (28th April 17:45 BST): Japan’s Financial Services Agency responded to our request for comment to confirm that the bill is still under deliberations and an enforcement date is not yet determined.

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A group of 34 companies from around the world has launched Japan’s first blockchain trade association, created with the aim to promote both investment in startups working with the technology and broader industry collaboration.
The Blockchain Collaborative Consortium includes a wide range of companies ranging from Microsoft Japan to Brooklyn-based ConsenSys, as well as a variety of established Japanese technology companies and startups.
The makeup of the membership more closely aligns with that of the Linux Foundation-led Hyperledger, a consortium including technology companies, startups and financial institutions, compared to the consortium run by R3CEV that primarily focuses on banks.
The consortium's backers say they hope to encourage industry collaboration and information-sharing, while at the same time committing to increase public awareness, according to a TechCrunch Japan report published today.
The group said in a statement:

"We will coordinate with other blockchain organizations around the world. We will bring home what we learn from overseas, and as a leading country of blockchain technology, we will disseminate our expertise and experience globally."

The establishment of the consortium comes as the Japanese government looks to solidify its regulatory position on digital currencies.

Japan making moves

In February, Japanese regulators reportedly proposed treating digital currencies like bitcoin similarly to conventional currencies. A month later, a Japanese legislator called for a tax exemption on the purchase of bitcoin.
According to an unconfirmed report earlier this week by the Japan Times, senior Japanese government officials had given their approval to legislation that would help integrate digital currency with the traditional banking system.
Image via Shutterstock

Gaming Platform Steam Now Accepting Bitcoin

Confirming a long-rumored move, gaming and digital media platform Steam is now accepting bitcoin payments through processing service BitPay.

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The announcement today confirms earlier reports that Valve, the company that operates Steam, had sought to add the digital currency as a payment option. Steam was said to have told its developer community in a recent update that it was moving to accept bitcoin.
The platform draws millions of users on a daily basis, according to Steam's self-reported statistics, and as a platform attracts an engaged and tech-friendly user base. Past reporting indicates that the platform sees hundreds of millions of dollars in monthly revenue for its diverse games and digital media marketplace.
In a blog post announcing the move, BitPay said that it was approached by Valve because the company was seeking payment options in less accessible areas of the world.
BitPay said:

"Valve reached out to us because they were looking for a fast, international payment method for Steam users in emerging gaming markets in countries like India, China, and Brazil. While more users are coming online in in these countries, traditional payment options like credit cards often aren't available."

Steam did not immediately respond to requests for comment.
Image Credit: g0d4ather / Shutterstock.com
Disclaimer: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in BitPay.

Fidor Bank Veteran Joins Kraken as Senior Legal Counsel

Kraken has hired Edward Stadum from Fidor Bank to help oversee the increasingly complicated legal work related to running a global digital currency exchange.

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In interview, Stadum said he left the Germany-based Fidor on good terms, explaining that his new position overseeing Kraken’s legal work in Asia, Europe, the US and beyond stands to benefit both companies.
He told CoinDesk:

"There’s a very important working relationship that involved Fidor providing banking account support to Kraken customers in the EU. And that’s important business for them both."

Stadum will work "with particular emphasis" on San Francisco-based Kraken’s best business practices, corporate governance, finance, acquisitions, strategy, technology and regulation. Previously, he served as US general counsel for Fidor.

Ransomware a top priority

As general counsel, Stadum's first priority going forward is helping Kraken deal with numerous requests by users who want to create accounts for the purpose of buying bitcoin to pay off ransomware, a cyberattack during which hackers freeze computer assets and demand payment in bitcoin before they restore access.
Some of these customers, Stadum suggested yesterday, have come to Kraken after being denied service by other bitcoin exchanges.
“A request came into us just today from someone who said he needed bitcoin to pay ransomware and he’s gone to several exchanges and been denied,” he added.
Among his other duties, Stadum will help Kraken look into the potential legal implications of knowingly setting up accounts for the specific purpose of paying ransom requests.
Stadum said:

"This poses some potential interesting challenges for a bitcoin company for whether it can or should provide bitcoin for such a purpose. This is something that's coming at us right now and is a perfect example of what I'll be doing as the general counsel."

A continuing partnership

Stadum tells CoinDesk that he was originally commissioned by Kraken to write a report on certain aspects of the company’s legal matters, a process during which he concluded "that Kraken badly needed a good general counsel."
"Ed wanted to join the team after seeing what was ‘under the hood’ while conducting an audit of Kraken," founder and CEO Jesse Powell said in a statement. "In fact, having a window into how things work at Kraken made him even more interested in joining our exchange."
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Payments Firm Qiwi Wants to Launch Russia's R3CEV

Russian payments provider Qiwi has revealed it wants to launch a domestic blockchain consortium it compared to the 44-member banking consortium R3CEV.

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In statements today, Qiwi CTO Alexei Arkhipov expanded on his company’s work with blockchain tech, reiterating how the company has developed its own prototypes for payments processing. Originally nicknamed ‘BitRuble’, the project caused concern among local regulators, who have been moving to formally ban the use of blockchain-based digital currencies.
Arkhipov, however, said that sentiment regarding the technology is now changing, and that Qiwi is looking to create a consortium of regional banks, financial institutions and enterprise businesses that could band together to further explore the emerging technology.
Arkhipov said:

"We see that the debate on the blockchain in Russia has become more substantive and constructive. By ​​creating a consortium similar to R3 ... many companies will have the opportunity not only to investigate but also to test existing prototypes."

If successful, the effort would mirror similar work underway globally. For example, the Dubai government announced the creation of the Global Blockchain Council (GBC) in May, a 30-member group of tech businesses, startups and government agencies.
To date, R3 has been perhaps the most visible of these efforts, uniting 44 global financial institutions on trials that have so far replicated commercial paper trading and trialed private versions of blockchain technology from the Ethereum project.
Qiwi logo image via Facebook

BitGo Engineers Launch Ethereum Wallet Side Project

Amid escalating interest in the Ethereum blockchain platform, a group of software engineers at bitcoin security specialist BitGo have created a multi-signature wallet offering
The news follows the release of the first production version of the Ethereum platform, Homestead, last week. At the time, Ethereum's developers also released Mist, a more user-friendly wallet that would allow users to deploy smart contracts and store ethers, the digital currency that powers its applications.
Despite this progress, however, wallet development on Ethereum has perhaps lagged behind, an issue creator Vitalik Buterin recently told CoinDesk that he hopes the wider open-source blockchain community will help it address.
Signs are emerging that this is already happening organically.
Ben Chan, Mason Borda and Barath Chandrashekar, software engineers at BitGo, have released Ether.li, a multisig, two-factor authentication wallet for storing and transmitting ethers, the native token on the Ethereum network, in part to apply their expertise to this challenge.
"There has been a lot more interest in ether recently," Chan explained. "I, myself, got into ether pretty early on during the early stages of the project and I was looking to find a model to store ether. At the time, I could only find two kinds of wallets."
The problem, Borda and Chan explained in interview, was that there were technical tradeoffs to running a wallet.
Borda said:

"The desktop wallets that are available today look great and aren’t challenging to use, but there is a huge technological limitation, which is the requirement of the running node in the background. If you wanted a wallet accessible from any device or computer, there were single-signature wallets."

Borda went on to argue that a user would be making a significant technological compromise by going with the convenient route of using an accessible wallet.
While Borda and Chan both work for BitGo, they were quick to comment that this product is not being released officially under the BitGo banner. However, Borda explained that the launch has the blessing of the startup.
"[CEO] Mike [Belshe] encouraged us to launch this," he said.

Multi-sig and Ether.li

Creating a wallet on Ether.li takes only about one minute, a speed that's faster than bitcoin wallet users may be used to. With shorter block times, syncing the blockchain's full history with the wallet is therefore shorter.
"When you sign up and create a wallet, it actually deploys a multisig contract onto the Ethereum blockchain," Chan said. "This is a 2-of-3 multisig contract. This kind of model is standard in bitcoin.”
Unlike a single-signature wallet, a multi-sig, 2FA wallet requires that there be more than one signature approving a transaction. In the example of a 2-of-3 multisig contract, the first signature would be the user on the wallet, but the second might be a SMS text sent from BitGo.
"When you want to make a withdrawal or send your funds, one of the signers for that contract, one signature would be the web client and then BitGo," Borda said. "[BitGo] only applies that signature when we get a SMS from the user confirming that they want to send it."
For example, if a user wanted to send Ether to someone else, they would initiate the transaction on Ether.li. They would then wait for a text message that asked for a code, which is the second signature. The user would put that code in and this would send the ether to its destination.
In the event that individuals lose their private keys he said: "Multi-sig lets you get around that problem."
Both developers did caution that this wallet was still in its early stages. In the FAQ, the team said:

"Our decision to release this product was based on demand and out of a personal need for better security. However, we caution that this wallet has not undergone a security audit."

BitGo and Ethereum

Ether.li is being released, the team says, out of a desire to get something out to the market in a relatively short timeframe.
Despite this, he said BitGo intends to apply its technology for use in the Ethereum space, provided a market continues to develop.
"We consider ourselves a security company," Belshe told CoinDesk. "Our work has been entirely in keeping the bitcoin currency safe and the same problems you have protecting bitcoin in an online world you have in protecting any cryptocurrency. We think we can provide value in the Ethereum space."
While BitGo did not have anything official to announce at the time of the interview, Belshe did say that his firm would be launching an industry-grade Ethereum wallet "very soon."
He concluded:

"We actually haven’t really planned to announce anything yet, but we’re going to be in the Ethereum space."

What Circle's UK E-Money License Means for Bitcoin and Blockchain

Circle Internet Financial set off a wave of positive press last week when it revealed the news that it had become an electronic money institution registered under the Financial Conduct Authority (FCA) in the UK.
Though enthusiasm was high, there was confusion over the nature of the licensing and how it enables Circle to further its operations. Of note, is that the e-money license is not digital currency-specific, with the E-Money Directive being introduced in the UK in September 2009. The FCA, sources noted, is still debating how it will seek to regulate digital currencies in the UK.
However, the e-money license does now allow Circle to work with the UK Treasury on a process by which it will inform regulators in other European nations of the license in a bid that could find it expanding its fiat money services across the European Union.
For now, the licensure proved sufficient to enable Circle to establish a relationship with UK banking giant Barclays. As such, industry commentators were quick to voice their belief that the announcement would do much to improve the perception of bitcoin and blockchain technologies more broadly.
IDC Financial Insights research director James Wester, for instance, said the news was perhaps a sign that the idea is falling out of favor that blockchain and distributed ledgers would disrupt payments and banking, and that banks may now become key drivers of the emerging technology’s wider adoption.
Wester told CoinDesk:

"Banks themselves are [now] exploring the potential for the technology. So over time I think you will see more connections and relationships between the community building up around blockchain technologies and financial service providers, vendors and regulators."

Wedbush Securities analyst Gil Luria echoed this view, stating he believes Circle’s license would put pressure on global regulators, an opinion that was widely voiced in the community.
"I expect other [regulators] to simply feel comfortable regulating the actual financial service provided without caring what network they are provided on," he said.
Overall, sources compared the license to Circle’s traditional money services business (MSB) licenses in the US, where it is authorized to provide services in US dollars in all 50 states.
As such, the e-money license, they indicated, serves as a counterpart to its digital currency services, one that more directly relates to the company’s goal of innovating on the payments industry business model with blockchain technology, and that as such, is unlikely to have a wider impact on startups.

Market leader

Most immediately, commentators agreed that the announcement further positioned Circle as a market leader in the digital currencies space. Founded in 2013 by Brightcove founder Jeremy Allaire and its senior architect Sean Neville, Circle has already raised $76m over three funding rounds, boasting investors such as Goldman Sachs and Fenway Summer.
Wester indicated that Circle’s license would now allow it to perform limited cross-border and cross-currency transfers from Europe to the US, a move that would allow them to test a prominent use case for blockchain at scale.
"[This] is particularly interesting given that those transactions have often been cited as a good use case for blockchain," he said.
Circle is also notably the only bitcoin services company to have received a license from New York state since the introduction of its state-specific regulatory regime, the BitLicense, in early 2015. According to CoinDesk estimates, more than 20 companies remain waiting for a formal approval for this designation, though the NYDFS has promised forthcoming news.
BuckleySandler LLP counsel Dana Syracuse, who helped develop the BitLicense application in New York, said that the licensing is an example of how companies in the financial services industry can use regulation to compete for investment and business.
"Ultimately, compliance distinguishes companies in the market," he said.
Circle chief compliance officer John Beccia further stressed that regulation has become a key competitive advantage for Circle, even if other companies may not need a traditional money services license as part of their strategies.
He told CoinDesk:

"Having taken that approach from day one to be engaged with regulators, to be very comprehensive, it’s been helpful in attracting investors and banks and in being able to get to market quickly."

UK pulls ahead

In a global context, commentators saw the news as the latest that finds the US and the UK competing for a front-runner position as the leader in global FinTech innovation.
Commentators in the US were keen to stress that the announcement is perhaps proof that the UK’s strategy toward encouraging blockchain industry development is proving more successful in encouraging innovation.
Coin Center director Jerry Brito, for instance, positioned Circle's opportunity to extend services across the EU as one that would not be possible in the US due to its state-by-state approach to bitcoin regulation.
"If the US doesn’t wake up, it’s going to find itself behind and it’s going to lose the competitive edge," Brito told CoinDesk, adding:

“This isn’t by chance, the UK government has identified this as a way they can compete with the US globally.”

Brito cited the recent news that bitcoin exchange itBit had stopped serving consumers in Texas as evidence of how this is harming development of a more robust digital currencies ecosystem, holding it up as an example of state-by-state inconsistencies.
Beccia agreed with this opinion, praising the FCA for a "reasonable" approach to the regulatory process.
“The message is that the UK is being very proactive on this, they’re encouraging FinTech,” he said. “It’s been a really encouraging environment.”
The viewpoint that this development was potentially a negative for the US was supported by Consumers’ Research executive director Joe Colangelo, who voiced his belief that the announcement could encourage more innovation abroad.
He concluded:

"I wouldn't be surprised if this simplified approval from the UK led to more bitcoin and blockchain companies considering setting up shop overseas in the future."

Disclaimer: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Circle.

Racetrack image via Shutterstock

CFTC Commissioner: Credit Default Swap Test ‘Proves Merit’ of Blockchain

Recently completed blockchain and distributed ledger tests at major financial institutions are "proving the merit" of the technology, J Christopher Giancarlo, commissioner of the US Commodity Futures Trading Commission (CFTC), said today.
In a keynote address at an event held today by the Cato Institute, Giancarlo cited a recent "successful test" of the use of blockchain in the credit default swaps markets. Announced earlier this month, the trial was organized by the DTCC and involved participation from Bank of America, Citigroup and Credit Suisse, as well as industry startup Axoni.
"I believe this exercise proves that there is merit to the potential of distributed ledger technology," Giancarlo said. "Other similarly promising projects are underway."
Involving 85 examples of the distributed ledger network’s functionality and resiliency, Giancarlo used the test as an example of how the technology is outpacing regulators and as evidence of his personal view that regulators should pursue a "do no harm" approach to regulation.
Touching on a wide range of subjects from the collapse of Lehman Brothers to the advent of bitcoin and its underlying blockchain, Giancarlo’s speech covered many of the same subjects first introduced in his speech at the DTCC's Blockchain Symposium in late March.
"For market participants, DLT [Distributed Ledger Technology] may help manage the capital complexity brought about by the disparate mandates promulgated by regulators here and abroad," he said.
On the regulatory side, Giancarlo indicated that he believes that global regulators need to harmonize how they share data, and that blockchain could provide a solution.
Still, Giancarlo expressed the worry that regulation could come from "a dozen different directions", a prospect that he used to support the idea that global regulators need to unite to provide oversight for the industry while preserving benefits.
Image via Cato Institute