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Mastercard, Visa, and other financial institutions that embroiled themselves in a coalition designed to forward Facebook's Libra cryptocurrency are reconsidering their positions.

According to the Wall Street Journal, people familiar with the matter say the response of regulators in the United States and Europe, and ensuing criticism and legislative concerns, has given banks cold feet. 


Mastercard and Visa, alongside companies including Uber, eBay, Stripe, and Vodafone, are public backers of the project -- at least, for now -- and are members of the Geneva-based Libra Association, the organization created for the management of the proposed virtual asset. 

Libra was first announced in June. Due to launch in 2020, Facebook has touted the proposed cryptocurrency as a payment method suitable for integration with Messenger, WhatsApp, and third-party e-commerce services that will be backed by fiat currency to prevent the turbulence often experienced in traditional crypto markets, such as through the trade of Bitcoin or Ethereum. 

The social media giant has attempted to reassure regulators that the payment alternative will enjoy the "same verification and anti-fraud processes that banks and credit cards use," but despite these claims -- and perhaps considering Facebook's own lackluster reputation when it comes to privacy and security -- authorities have been less than overjoyed at the prospect of Facebook moving into the financial sector. 

See also: Facebook debuts Libra cryptocurrency: a Bitcoin killer?

The WSJ says that government backlash and regulatory scrutiny has caused some of Libra's backers to decline requests made by the social media giant to publicly issue their support for the project. The Libra Association has been summoned to a meeting in Washington on Thursday and backers will be expected to answer policymakers' questions. 

The US Federal Reserve has already branded Libra a "serious concern" and a project that "cannot go forward" unless Facebook submits its plans for a full regulatory review. Last month, French authorities said they would move to block Libra unless consumer and financial concerns are addressed. 

It is unsurprising that some financial institutions would consider Facebook's reach -- including over 2.4 billion platform users -- combined with a payment infrastructure as a prospect for profit and future revenue. 

CNET: Everything you need to know about Facebook's Libra
cryptocurrency

However, unless the social network is able to quell the concerns of regulators, there may be the risk that major financial players will withdraw their support, which has only reached a non-binding letter of intent stage. 

Without the backing of these companies, Libra could finish before it has begun, or at least, its potential as a payment method will become very limited. 

TechRepublic: Money, tech and food: 10 coolest companies in Inc.'s Female Founders 100 list

David Marcus, the Libra project leader at Facebook, addressed the WSJ report in a series of tweets.

The executive said that "change of this magnitude is hard" and for "Libra to succeed it needs committed members, and while I have no knowledge of specific organizations plans to not step up, commitment to the mission is more important than anything else.

"Marcus added that Facebook is "very calmly, and confidently working through the legitimate concerns that Libra has raised by bringing conversations about the value of digital currencies to the forefront.

"ZDNet has reached out to Mastercard and Visa and will update if we hear back. 

Blockchain was first introduced in 2009 with the launch of its first application, Bitcoin. In its simplest form, blockchain is a decentralized digital system of record in which untrusted parties can share a digital history and reach consensus without an intermediary.

It is comprised of a time-stamped series of immutable records of data that is managed by a cluster of computers that are not owned by any single entity. Each of these blocks of data is secured and bound to one another using cryptography.

Each block contains a cryptographic hash of the previous block, a timestamp and transaction data. By design, a blockchain is resistant to modification of the data.

Have you read?

• 5 key concepts for blockchain newbies
• Still don't understand blockchain? Let's untangle the wires
• Is blockchain overhyped? 5 challenges to getting projects off the ground

During myriad conversations with global chief experience officers (CXOs), I realized that many of them are not fully confident in their understanding of blockchain. Here are a few of the most common misbeliefs and traps that decision-makers need to disregard when considering blockchain for their respective businesses:
1) “Blockchain is all about cryptocurrencies, particularly Bitcoin or Ether. We cannot internalize cryptocurrencies in our businesses”This common belief is incorrect.

Blockchain has several versions – public and private - the most known examples are Bitcoin and Ethereum networks where everyone (nodes) has equal rights to transaction creation and validation, data access and producing new blocks.
Cryptocurrencies rely on the “public permissionless” version. There are other versions like “public permissioned” where anyone who meets certain predefined criteria can download the protocol and validate the transactions, and parties joining the blockchain network will need prior permission.
“Private permissioned” may be most relevant for enterprise applications with respect to privacy.

Every node or participant in a blockchain network is pre-selected and validated. These are usually implemented in a consortium model and used for situations that require collaboration between businesses. There are no cryptocurrencies; mining is irrelevant here.
For example, an enterprise could set up its own blockchain network to accomplish network effects and obtain business collaboration between its suppliers, partners and customers for procurement and delivery of goods. Suppliers and partners belonging to another enterprise could not join this private chain.2) “Blockchain is emerging tech, it's cool. Let us implement it for tech’s sake”Some companies approach blockchain purely because of their fascination with technology. This is a recipe for failure. Blockchain implementations should be led by business outcomes.

The tech led fixation has been fed by the software and platform industries releasing ever more advanced versions with emphasis placed on the technical features. Blockchain implementations, both public and private, however, are and will be successful when they are implemented to:

1. Provide a new experience to end customers;

2. Meet unfulfilled or under-served needs;

3. Accomplish complete or partial disintermediation;

4. Reduce mistrust by digitizing trust and preserving the provenance of an activity or material.
These four attributes can address millions of problems that today exist in any form of interaction – B2B, B2C, P2P, machine-to-peer or machine-to-machineThere is a tendency to dismiss private blockchain as a flat file or database that is nothing but old technology.

Public blockchain also uses established components like C++ (for Bitcoin, invented in 1985), asymmetric encryption (invented in 1976), Proof of Work (invented in 1993) and SHA 256 (invented in 2001).

When these different technologies came together they ended up solving the double-counting problem in money applications, which computer scientists had struggled to solve since the early 1980s, through the invention of Bitcoin in 2008.

Indeed, at this stage, private blockchain should be used to solve tough business problems mainly when other technologies fail or are sub-optimal. Otherwise, blockchain initiatives will fail and discourage people from using or exploring them.

3) “To use blockchain, an industry-wide consortium is required. Someone else needs to start the chain and we will join it.”

There is a widespread misconception that for blockchain to be useful, everyone in an industry needs to be a part of it. Enterprises think that since it’s a consortium someone else needs to take a lead, start the chain and establish a code of practice for its effective function, and that once these are accomplished, they can join the consortium.

This is incorrect.

Based on our experience of implementing blockchain for several industries globally, enterprises can benefit significantly through private blockchain by starting their own chain. The approach here is DIY rather than DIFM (“Do it for me”) and could be considered a private chain or micro-chain.

These are very effective in addressing gaps in trust, which can increase when there is an interplay between companies, suppliers, partners and customers to accomplish common objectives and goals.

The value of such a chain to a company increases even further when the interaction involves a combination of legacy and non-legacy systems leading to different information islands or silos that dont talk to each other. Hence companies spend a lot of time and effort on data or information reconciliation that can be saved through implementing blockchain.

As such, these own chains can deliver tremendous collaborative benefits and achieve positive network effects.

We have deployed these chains in various enterprises to solve business problems such as:

- Reducing purchase order failures even after they are run on Electronic Data Interchange (EDI);

- Improving the expected time of arrival for customer orders that involve collaboration between various enterprise teams, order-fulfilment partners, warehousing partners and others;

- Tracking the movement of high-precision tools and the sharing of such tools between the original equipment manufacturer and its innumerable suppliers;- Managing forward and reverse logistics of non-serialized inventory involving several stakeholders;

- Safeguarding personally identifiable information and its exchange in a system that involves several players and preventing incorrect monetization of such information.

In essence, the opportunity for enterprises to build and use their own chains to drive transformation, whether pertaining to processes or digital operations, is now.

   
Written by

Rajesh Dhuddu, Global Practice Leader for Blockchain, Tech MahindraThe views expressed in this article are those of the author alone and not the World Economic Forum.

Block.one, the company behind the EOS cryptocurrency, today settled charges with the U.S. Securities and Exchange Commission by agreeing to pay a $26 million fine over its unregistered ICO.In 2017, Block.one raised the equivalent of $4 billion through the ICO that launched EOS.

You do the math.

As usual, the object of the SEC’s enforcement action has settled with the Commission without admitting or denying the charges. What’s unusual, however, is the relatively light penalty that the SEC has opted to levy against Block.one.

No disgorgement. No rescission (forcing Block.one to refund the many billion dollars-worth of tokens it sold). No nothing—other than a civil penalty that amounts to nearly one half of 1 percent of what the company raised in its ICO.

No lifeline for Kik

Kik CEO shuts down 300-million strong messaging app to fund war with SEC

Update [September 24, 14:00 UTC] - This article has been amended to remove messages that were supposedly sent to CoinDesk by Kik CEO Ted Livingston. It turns out that CoinDesk fell foul to a h...


NewsBusiness

Robert Stevens

September 24, 20192 min read


“A number of US investors participated in Block.one’s ICO,” Stephanie Avakian, co-director of the SEC’s Division of Enforcement, said in a statement.

 “Companies that offer or sell securities to US investors must comply with the securities laws, irrespective of the industry they operate in or the labels they place on the investment products they offer.

”Yeah, but, do they really?For the last two years, the SEC has gained a reputation within the crypto industry for its campaign of Shock and Awe against ICO-funded startups that have been treated to a crash course in federal securities laws.

Today’s move from the Commission served up a whole lotta shock, and heaping dose of awe, but of an entirely different flavor.And reaction to the news from legal experts and industry insiders across the cryptosphere has so far been exactly what you’d expect.

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Gabriel Shapiro, an attorney and founder of the crypto-focused ZeroLaw, pulled no punches: “Honestly I think this is a bad look for the SEC,” he wrote on Twitter. “This sends a message that violating securities laws can be quite profitable.

”Nic Carter, partner at Castle Island Ventures, echoed the sentiment: “The lesson here is that the government will not protect investors or demand disclosure from issuers,” he wrote.

What’s more, beyond avoiding costly penalties and rescission orders, Block.one has also dodged any requirement to register EOS as a security.

The SEC’s order, as Block.one noted in its own statement regarding its settlement today, deals strictly with the ERC-20 “placeholder” token that the company sold to investors during the ICO—and not the EOS token that is currently in circulation.

In so doing, the SEC sidestepped making any decision regarding the status of EOS today—security or non-security—which means cryptocurrency exchanges will not necessarily be required to delist the token.

To be a fly on the wall of Kik's (former) headquarters right now.

A report by JP Morgan Chase & Co Friday said the underwhelming launch of ICE’s Bitcoin futures contracts exchange, Bakkt, is responsible for Bitcoin’s latest price crash.

The project's price fell off a cliff last week, falling more than 20 percent from $10,026 last Sunday to today’s price, $7,933. Bakkt is the brainchild of the Intercontinental Exchange, the organization that runs the New York Stock Exchange.

On Bakkt, investors could bet on the future price of Bitcoin, and place and receive those bets in Bitcoin, too. Experts hoped Bakkt would bring Wall Street money to Bitcoin because it has the backing of Wall Street’s regulators, like the CTFC. 

While the JP Morgan report noted that the Bakkt contracts are a welcomed sign of the crypto market growing up, trading has been relatively underwhelming. Right now, just 54 Bitcoin is being traded ($430,000). Not much considering the hype. 

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But the JP Morgan report suggested that “It may be that the listing of physically settled futures contracts (that enables some holders of physical Bitcoin e.g. miners to hedge exposures) has contributed to recent price declines, rather than the low initial volumes,” JPMorgan’s analyst wrote in the report, according to Bloomberg. 

The report said that Bitcoin’s price peaked a while ago, and the market only just started suffering as old deals, excitedly made from the ambitions of Bitcoin’s bull run, finish up.

“This position liquidation has also likely contributed to the sharp falls in Bitcoin prices this week,” said the report. 

While Bitcoin’s price has got rid of the “overhang of long Bitcoin futures positions...in Bitmex futures, this is not yet true for CME contracts,” said the report.

In other words, though the reasons for last week’s misery have cleared up, the completion of over-valued CME contracts in the coming weeks and months could further depress the Bitcoin market. Hold on to your hats.