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Last week’s updates:

Japan: the first to see mainstream adoption?

Japan’s largest exchange has closed a $1.76M round of fundraising from three Japanese banks. Japan has put forth legislation that would require cryptocurrency exchanges to be registered with the country’s Financial Services Agency. This new law will establish greater regulatory clarity around facilitating the selling and trading of digital currencies. This could lead the way for licensed financial service firms to facilitate the use of this new asset class among their customers. Another bill passed last year had reduced the constraints around financial firms investing in non-financial businesses, such as technology companies. It’s likely that this round of financing is an attempt by financial incumbents to better position themselves to take advantage of this emerging market of digital asset speculation. Could Japan be the first blockchain hub of the world to see traditional banks offering up cryptocurrency investment products?

Swift ditches blockchain.

Swift is showing off its new global payment system which does not use any blockchain technologies. This system is aimed at improving correspondent banking using traditional alternatives and is starting to come out of the pilot stage. It is likely that this push to innovate on Swift’s offerings was influenced by Bitcoin and the blockchain craze that has taken hold of their customers. Blockchain technologies’ biggest proposition value is removing intermediaries like Swift. Good to see they’ve woken up to the nagging threat of blockchain that just keeps getting louder.

Blockchain-ing ain’t easy.

Great guest post in Coindesk this week by Arno Laeven who was the blockchain lead at Philip’s before going out on his own. He points out the difficulty of trying to cram blockchain in with existing business processes and how, often times, the experienced users of this technology — the early adopters — are not at the table helping to steer the firm’s strategy. Arno views blockchain technologies as the ‘foundational’ layer that should replace legacy systems, which are the route of the inefficiencies trying to be solved for. This is an important point and identifies the major challenge of incumbents adopting blockchain technologies. You’re required to replace entire established systems with a new standard. This is a major feat for a large enterprise and an even bigger one when you’re attempting to convince your competitors to jump in and use your proprietary blockchain. This is a political challenge rather than a technical one. This is why Cryptiv sees consortium based blockchains as having a hard time competing against public networks like Ethereum — a permissionless foundational layer to build applications on top of without having to trust others on the same network.

A historical perspective on blockchain.

An interesting report has come out from the central bank of Canada. It examined the Canadian experience of regulating several ‘private currencies’ that were in circulation at the same time as government issued notes — back when banks issued their own bank notes backed by the assets on their balance sheets. The authors looked at how these private notes were successfully regulated and suggested this could give insight into how central banks should approach digital currencies like Bitcoin. An interesting perspective but this report assumes Bitcoin and other cryptocurrencies will be widely adopted as a medium of exchange which, for now, has not been the predominant application of these digital assets by early adopters. As argued before on this newsletter, the existing use case for public blockchains is for financial speculation and as an alternative store of value. The report argues regulation could make cryptocurrencies safer for the consumer.

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