In this opinion piece, the authors explain the significance of a recent CFTC approval regarding the LedgerX cryptocurrency derivatives platform, and its potential impact on the market. As interest in cryptocurrencies continues to grow, ‘crypto-derivatives’ may begin to find a place alongside other more established elements of the crypto economy, such as payments and securities tokens.
Japan's Mizuho Bank recently completed a Proof-of-Concept (PoC) for the use of artificial intelligence (AI) to simplify the complex processes involved with derivative contract operations. Using optical character recognition to digitize ISDA contracts, the bank was able to define, extract, and archive all relevant information from the digitized contract into a format that could be easily accessed and searched, considerably improving operational efficiency.
Mizuho and NRI use AI to Eliminate Tedious Derivative Contract Procedures
Mobile payments have taken hold over the past decade, as consumers increasingly move away from using cash and cards to favouring their smartphones for completing transactions. While today’s financial innovations are being driven by disruptive “FinTech” firms, the mobile payments space has been dominated instead by “TechFin” firms.
How Tech Giants Took Over the Mobile Payments Market
The U.S. Securities and Exchange Commission (SEC) has confirmed that blockchain tokens are not exempt from securities laws, ruling that tokens issued last year by The DAO (a decentralized autonomous organization that utilized the Ethereum blockchain and was subsequently hacked) constituted “securities”. The SEC chose not to take legal action in that case, indicating that it will investigate similar initial coin offerings (ICOs) on a case-by-case basis.
There is No Blockchain Exemption in Securities Law
The WFE represents more than 200 market infrastructure providers, and is currently exploring how distributed ledger technology (DLT) can better optimize processes and efficiency in the exchange and central counterparties (CCPs) ecosystem.
World Federation Of Exchanges To Establish DLT Working Group
The Financial Stability Board (FSB) is chaired by Mark Carney, Governor of the Bank of England, a noted advocate of the potential benefits of FinTech. Carolyn Wilkins, Senior Deputy Governor of the Bank of Canada, chairs the FSB’s FinTech Issues Group.
Financial Stability Board Issues Report on FinTech: "Regulators Need to Understand the Impact"
In 2015, the former Barclays boss predicted a decline in bank staff and branches "by as much as 50 percent over the next 10 years". Today he warned that cryptocurrencies like bitcoin are only the beginning: "This is just in the footprints of what's going to happen. As these technologies season and develop, we can imagine total transformation of the banking system, using blockchain for example, to a world where banks don't really exist anymore."
Ex-Barclays Chief: Banking Could Face ‘Kodak Moment’; Banks Should Embrace FinTech
A new report from Innovate Finance considers the potential of regulatory technology (RegTech) to facilitate a ‘systems evolution’ in financial regulatory infrastructure. RegTech has mainly focused on process automation, to improve reporting efficiencies and ease the compliance burden. However, the next wave of change will involve a radical rethink of regulatory mechanisms as regulators reimagine rules and processes for the digital age.
Innovate Finance Publishes RegTech For Regulators Report
The International Monetary Fund (IMF) is continuing to explore the potential of digital currencies and distributed ledger technology (DLT). In a new discussion note entitled "Fintech and Financial Services: Initial Considerations", both initial coin offerings (ICOs) and central bank-issued digital currencies are examined.
New IMF Discussion Note Explores ICOs and Central Bank Coins
R3CEV is a distributed database technology company leading a consortium of more than 70 of the world’s largest financial institutions. According to CEO David Rutter, consortium members are interested in different “themes” when deploying blockchain technology, including trade finance, global digital identification, post-trade processing, and payment applications.
R3 Aims to Build the 'Operating System of Finance'
Blockchain technology could transform capital markets infrastructure and enable savings for the entities involved by reducing duplication of processes, settlement time, collateral requirements and operational overheads. This, in turn, would minimize the need to set aside financial resources to cater to counterparty risks and achieve higher anti-money laundering standards and reduced risk exposure.