Coin News

Payments Canada, the Bank of Canada, TMX Group and Accenture have shown — through their collaboration on Project Jasper — that it is feasible to instantaneously clear and settle securities on-ledger, and have demonstrated for the first time that both central bank cash and assets can be tokenized to complete instant equity settlements via distributed ledger technology (DLT).

Payments Canada owns and operates the country’s payments clearing and settlement infrastructure, and works to ensure the privacy and security of Canada’s financial transactions. Every day, the company processes roughly $200 billion in payments, while the Bank of Canada — the country’s central bank — instills monetary policies to lower inflation and promote financial stability.

TMX Group operates cash and derivatives markets and clearinghouses for asset classes like equities and fixed income. The organization provides trading facilities to Canada’s financial community, while Accenture offers solutions in strategy, technology and operations to improve business-client relations and to create sustainable value for stakeholders.

Project Jasper is a collaborative research initiative between the four institutions to understand how DTL could transform the payments system, and to experiment with a DLT-based integrated securities and payment platform. Jasper III, a continuation of a March 2016 venture, is a proof of concept that explores the benefits of DLT on Canada’s financial systems.

Gerry Gaetz, the president and CEO of Payments Canada, commented, “This proof of concept shows that it is possible to deliver payments in a way that has never been done before — by directly swapping cash from buyers to sellers, resulting in instant settlements. We continue to see how the application of distributed ledger technology can help extend the vision of payments innovation in Canada and potentially, one day, help promote financial market integration both nationally and internationally.”

At first, Project Jasper focused primarily on approving and resolving high-value interbank cash payments using the technology behind distributed ledgers. The program is now being reformed to explore integrated payments and securities and to push a “delivery versus payment” system to cut out future counterparty risks and collateral blockades.

Jasper III is the only proof-of-concept development that provides transaction histories to parties specifically involved in those transactions. Other participants are prevented from accessing this data, ensuring that the privacy of market participants is maintained. A white paper further detailing Jasper III’s findings will be released later this year.

“Maintaining privacy, as well [as] integrating other assets onto the same ledger as payments, would provide important benefits for the financial system from the use of a DLT-based wholesale payment system,” said Carolyn A. Wilkins, senior deputy governor at the Bank of Canada.

“Indeed, a key lesson from prior phases of Jasper was that the benefits of a DLT-based wholesale payment system likely lie in its interaction with the broader FMI [financial market infrastructure] ecosystem. Such benefits would come from reaping economies of scope and reducing costs to participants.”

One of the first launches out of the gate at Consensus 2018 is from SALT (Secured Automated Lending Technology) Lending Holdings. The Colorado blockchain-based cash loan provider is launching the SALT Bridge Foundation to create a financial leg up for the estimated two billion unbanked and underbanked people around the world.

SALT (named after salt — historically the first commodity-based money) uses blockchain technology and smart contracts to offer a lending program based on cryptocurrencies as a collateral.

The mission of the SALT Bridge Foundation is to use blockchain technology and cryptocurrency education and lending services to financially empower those without banking services in the developing world.

The SALT Bridge Foundation will provide students with courses in blockchain technology and cryptocurrencies, and the opportunity to work with nonprofit organizations to implement blockchain technologies in communities around the world.

Describing the foundation’s mission as “creating a bridge to cryptocurrency and the understanding of blockchain,” SALT Executive Director Dan Moore said in a release:

“Blockchain allows us to truly implement the long-held vision of utilizing technology to improve the economic standing and the autonomy of everyone on this planet. I am honored to lead the Salt Bridge Foundation as we contribute to a greater shared future.”  

Education and Training

The foundation is already running a pilot project jointly with Denver-based Regis University College of Business and Economics. Students are learning the basics of blockchain technology and cryptocurrencies with courses on financial literacy and the benefits of cryptocurrency and blockchain-based financial systems.

In an interview with Bitcoin Magazine, Moore said:

“We are working with underbanked students at Regis University to provide financial literacy education and aid to be a part of this amazing experience. We are excited to see this program grow and deepen our partnership with such a respected and influential university.”

He added, “The chance to apply what you learn in the classroom to the real world for a meaningful and tangible impact changed my entire perspective and this program provided a natural partnership for the work of the SALT Bridge Foundation.”

After completing the course, scholarships enable students in this pilot project to go into the field in Uganda to participate in a social-impact program aimed at improving financial inclusion.

Moore explained why SALT chose Uganda for their first project:

“We initially targeted West Africa for a number of reasons: first and foremost, the lack of access to formal financial services results in substantial levels of poverty and with approximately 350 million unbanked adults in Sub-Saharan Africa, there is a tremendous need for the opportunities financial inclusion can provide.”

He added, “We have seen progress through the burgeoning mobile ecosystem, which has demonstrated varying levels of success, and we believe the SALT Bridge Foundation can augment that work.”

The foundation also plans to train staff from voluntary and nonprofit organizations in how best to use blockchain technology and cryptocurrencies for donation management.  

Providing a Financial Blockchain Platform for the Unbanked

The other component of the foundation involves using the SALT platform by providing access to blockchain-based financial services where traditional systems are out of reach.

Moore told us they will be using SALT’s own proprietary lending platform, the Secured Automated Lending Technology platform, which operates a lending marketplace for blockchain-based assets, for the pilot project:

“We plan to use the SALT Lending technology to capitalize on the crypto-collateral we provide in our programs; however, we are not committed to any one blockchain and instead will use whatever tools [are] available to us that fit each program. As this technology progresses and we see increased adoption rates, we’re optimistic about the new possibilities that may become available.”

Moore expressed a preference for Bitcoin at this stage of the program, saying:

“At this time, we believe that Bitcoin is the most logical cryptocurrency emphasis; however, in the future, we will utilize the tools that will best help us achieve our vision. Much like SALT Lending, we are blockchain agnostic, and our mission and focus is providing opportunity for the financially excluded; therefore, we welcome any future innovation that aids that mission.”

Lenders are accredited investors in accordance with SEC federal regulations and have passed SALT’s Lending Suitability Test.  

The foundation hopes to expand its program to other countries and regions and is also exploring ways that it can more effectively help other foundations use, manage and obtain advantage from cryptocurrency holdings.

“We are passionate about the global social impact we can provide in bringing financial inclusion to this region and look forward to showing the world the true value of this technology,” concluded Moore.

Digital identity company Netki just made it easier for companies launching token sales to onboard their customers in a way that keeps them compliant with existing security laws.

The Los Angeles-based company announced today, May 15, 2018, at Consensus 2018 in New York City that it is adding investor validation to its existing know-your-customer (KYC) and anti-money-laundering (AML) solution. The service allows investors to upload requisite documents via a web browser or mobile app.  

Compliance is a huge concern for ICO projects right now. Regulators are in the midst of trying to decide how to label virtual currencies, and it is looking as if they may rule that many existing tokens are non-compliant securities.

Earlier this year, for instance, Jay Clayton, chairman of the U.S. Securities and Exchange Commission (SEC), said that, in his view, ICOs are “like a stock offering.” And, last month, at an MIT Tech Review event, Gary Gensler, former chairman of the Commodity and Futures Trading Commission, went so far as to advise virtual currency projects that “if you do an issuance now, in April of 2018, do it under the U.S. securities laws.”

As an alternative to doing an initial private offering (IPO), which requires projects to register with the SEC, many virtual currency projects are opting to structure their ICOs under exemptions, like regulation D and others, that limit token sales to accredited investors who can bear the risk of buying an unregulated security. These investors have to meet certain financial and economic requirements as spelled out by the SEC.

Netki’s existing structure allows an investor who wants to participate in a token sale to use their phone or computer to take a “selfie” along with photos of their driver’s license or passport to show they are who they say they are. Netki now goes a step further by also making it easy for an investor to upload documents that prove his or her income and asset holdings to show they are accredited.

Without an automated solution like Netki’s, virtual currency projects would otherwise have to onboard customers manually or outsource the work to lawyers.

“Doing it with their lawyers would be super expensive; doing it in-house would be slightly expensive and quite tedious and also prone to error,” Netki CEO and co-founder Justin Newton told Bitcoin Magazine.

He explained that Netki also uses algorithms to make sure the IDs are authentic. “We have a computer vision machine learning system that looks at every pixel of the ID for evidence of tampering,” he said.  

Once the financial data is collected, Netki has a network of third-party lawyers and professionals who can validate the documents and provide letters of attestation.

Netki says it never sees investors’ income data. “We just know that they met the standard and the only person that saw that was the professional who was doing that validation via confidentiality,” Newton said.

Once the customer onboarding is completed, Netki wipes the ID and income data from its system. “We don’t want to become a central PII [personal identity information] repository,” Newton said.

Netki was founded by Justin Newton and wife Dawn Newton in July 2014. The following year, the duo launched a product called Wallet Name Service, which allows people to send bitcoin to human readable addresses. That product is still alive and kicking, says Newton. Over the last few years, however, Netki’s development efforts have focused on identity solutions. A year ago, it launched its digital ID service for KYC and AML.  

“We saw identity, and specifically identity as it relates to risk and compliance, as one of the key enabling technologies for blockchain,” Newton said. In moving toward that goal, Netki raised $3.6 million in seed funding in July 2016.

Netki is not alone in focusing on identity solutions. Identity Mind and Onfido offer similar services, but neither of those companies offer investor validation tools thus far.