Australia’s Corporate Regulator: Cryptocurrencies Will Replace Banknotes

Cryptocurrencies will replace bank accounts, changing how Australians pay for things, according to Australia’s corporate regulator.

Within the next 10 years, Greg Medcraft, the chairman of the Australian Securities and Investments Commission, predicts that consumers could live without a bank account as cryptocurrencies replace them.

He also thinks in the next five to 10 years central banks around the world will be issuing their own cryptocurrencies. One of the banks he predicts will do this is the Reserve Bank of Australia. Consequently, as more banks consider digital alternatives they will force other banks to think about how they do business.

In an interview he said:

“The smart banks get it and are reshaping what they do, but they know they are probably living on borrowed time. With central-bank issued digital currencies, you might not need a bank account anymore.”

If central banks start issuing their own digital currencies, consumers will more than likely transact with them rather than a commercial bank. Or they could turn to a technology company. This then puts the onus on existing banks to reconsider their business models if they wish to survive.

Medcraft added:

“There will come a time when if you want to transact, you won’t need a private bank account because you will essentially have a digital wallet with the central bank.”

Banks Must Embrace FinTech to Stay Relevant

In June, Anthony Jenkins, the former CEO of Barclays, said that banks face the threat of becoming obsolete if they don’t embrace the fintech sector.

Speaking at a Money 20/20 Europe fintech conference in Copenhagen, Jenkins said:

“We’re really at the end of the beginning of what we see as a revolution driven by technology with financial services, and fintech is really a too narrow categorisation of what’s going on here. As the technologies develop and season, they’re going to create a totally different way of doing banking and financial services.”

According to Jenkins, if banks embraced the blockchain they could save between $80-110 billion. He has previously said that the fintech sector will disrupt traditional finance. In 2015, he claimed that within 10 years those employed within the banking sector would drop by as much as 20 percent. However, this could go as high as 50 percent.

Similar to his concerns in 2015, Jenkins reiterated his feelings back in June. Consequently, if banks wish to remain relevant they need to change how they do business.

He added:

“Banks can avoid [becoming irrelevant], but they have to act now, and what they really need to do is think about innovation, but also transformation, doing something radically different.”

Banks Invest in the Blockchain

In a bid to stay relevant banks are already making some changes. According to Robert Half Financial Services, 52 percent have invested in the blockchain. Those planning on introducing it is 30 percent while 14 percent may consider using it in the future.

Favourably, the findings found that 85 percent of financial services executives think that the blockchain will have a positive impact on the sector by 2022.

While work is still in progress with the blockchain, if it wasn’t worth investing in banks would simply ignore it. That, however, isn’t the case.

Will FinTech Disrupt Traditional Finance?

Interestingly, while many such as Medcraft are saying fintech will disrupt finance, the World Economic Forum (WEF) thinks otherwise.

In a report, it states that while fintechs have changed the arena for competitiveness, they aren’t producing that much impact on financial services.

Looking at the three main areas of competition for financial services, it looked at cloud computing, big data and artificial intelligence. WEF claim that Amazon, Facebook and Google have a thorough understanding of these compared to the finance sector. Thus, it is these companies that are becoming more disruptive to banks than fintechs.

Large-Scale Rollout of Two-Way Bitcoin ATMs in Australia

In light of Medcraft’s interview is the announcement that a partnership will take place between two fintech firms in Australia. Their aim is to update 2,900 existing ATMs, so that they can become two-way bitcoin ATMs.

According to a press release, a joint-venture will happen between ASX-listed blockchain startup DigitalX and ATM developer Stargroup. It adds that Stargroup has around 500 ATMs in Australia and manages another 2,400 ATMs through its subsidiary StarLink.

Presently, in Australia there are fewer than 20 ATMs that can undertake a bitcoin transaction. According to CoinRadarATM, there are 16 bitcoin ATMs in Australia. Not only that, but conversion fees vary between four to eight percent of the total value. Furthermore, most of these machines are only one-way, which means users can only purchase bitcoin and then add it to their wallet through the ATM.

With two-way bitcoin ATMs, users will be able to do the above. However, they will also have the option of converting their bitcoin to cash at the ATM. This provides greater flexibility and opens up more possibilities and wider adoption of the currency.

Leigh Travers, DigitalX’s CEO, said:

“With our growing success in blockchain consultancy services we view this opportunity as a suitable fit to offer ordinary Australians exposure to cryptocurrency. The success of this joint venture with Stargroup will add long-term revenue channels to our business and additional value to our shareholders.”

Todd Zani, Stargroup’s CEO and executive chairman, added:

“Stargroup is pleased to partner with DigitalX on this project and leverage its unique ownership of its ATM manufacturer to develop a two-way ATM where a bitcoin owner can not only buy bitcoin but more importantly can cash their bitcoin out. This development may also be able to be applied to other cryptocurrencies and be distributed internationally.”

The Rise of Cryptocurrencies

The use of cryptocurrencies such as bitcoin is rising. Japan is one country that is experiencing an influx in consumers using it to pay for everyday purchases. So much so, that by the end of 2017, it’s projected that there will be around 300,000 stores accepting it for payment.

As a result, it’s easy to see that the market will one day replace traditional bank accounts. Yet, this growing market still has a lot to do before it can claim that milestone.

Featured image from Shutterstock.

South Africa’s Central Bank Says It’s ‘Too Risky’ to Issue Digital Currency

The deputy governor of the South African Reserve Bank (SARB) has said that it would be ‘too risky‘ to start issuing its own digital currency.

Speaking at the Strate GIBS FinTech Innovation Conference 2017, Francois Groepe, the deputy governor of the South African Reserve Bank, commented on the development of a digital currency such as bitcoin. However, while bitcoin is gaining dominance, he stressed that the central bank needs to ensure that payment methods aren’t abused to fund money laundering or terrorism.

He noted, though, that digital currencies are becoming more recognised as people understand their concept.

As a result, he said that:

“Virtual currencies have the potential of becoming widely adopted. However, for the central bank to issue virtual currencies or cryptocurrencies in an open system will be too risky for us. This is something that we really need to think about.”

According to Groepe, though, the central bank has created a three-member team to look into how cryptocurrencies work. The bank is also expected to launch a digital currency sandbox to test how they function.

He also discussed the financial industry and how innovation is changing the sector, mainly through digital currencies.

He added:

“We are witnessing the disruption of financial services. Over the past decade or so, fintech’s attention and publicity has continued to intensify and increase. It is continuing to usher in completely new ways of banking. Developments in the fintech space are part of an evolutionary process driven by innovations.”

Bitcoin Dominates the Market

As of the 23th August bitcoin is trading at $4,239. This is a 6.93 percent increase in 24 hours, but a 0.08 drop in seven days. At press time, the digital currency’s market cap is worth over $70 billion.

Just yesterday, bitcoin’s price was listed at $3,674 as it underwent an early-week correction period. As a consequence, its market cap value dropped to $60.7 billion. However, this price rally has helped to push it back over the $4,000 mark. The recent drop in price is believed to be down to a hashrate shift from bitcoin to bitcoin cash.

According to a recent report, bitcoin cash surged to a new all-time high on the 19th August when it reached $914. Furthermore, the alternative to bitcoin was reported to have mined its first eight megabyte block, clearing nearly 40,000 transactions. According to data from Coin Dance, bitcoin cash had become 69 percent more profitable to mine than bitcoin.

Not only that, but concerns have been circulating the SegWit and SegWit2x debate, which may have pushed bitcoin’s price down.

Despite this, however, the number one currency is still the leader in the field. Ethereum, in second place, has a market cap worth $30.2 billion. Whereas, bitcoin cash, in third place, is valued at $10.9 billion. Nevertheless, fourth placed ripple is close behind with a market value amounting to $10.8 billion.

Are Fears Justified?

Considering the dominance that bitcoin is showing in the market, it’s may be surprising that South Africa’s central bank thinks it’s too risky to start issuing their own version.

Last August, it was reported that The Bank of England had issued its own digital currency. Known as the RSCoin, it shares similar traits to bitcoin such as being managed by the blockchain. However, one of its key differences is that it is centralised within The Bank of England. As a result, only one bank generates each unit of the digital currency.

The bank has keenly embraced the blockchain, which is evident in an excerpt from a quarterly bulletin. It says:

“… the key innovation of digital currencies is the ‘distributed ledger’ which allows a payment system to operate in an entirely decentralized way, without intermediaries such as banks.”

Not only that, but according to the U.K.’s central bank, they don’t see that digital currencies ‘pose a material risk to monetary or financial stability in the United Kingdom.’ However, it will continue to monitor developments in this area.

No doubt aware of how finance is changing, The Bank of England appear keen to maintain a hold on the sector even if that means issuing their own digital currency.

SARB Begins Testing Digital Currency Regulations

Yet, while South Africa’s bank may not be issuing its own cryptocurrency anytime soon, the bank has been discussing regulations for bitcoin.

As a result, SARB are reported to be having discussions with blockchain-based solutions provider Bankymoon. According to a report, the central bank and Bankymoon are to undertake an experiment to test regulations for the digital currency.

Both, however, are in the early stages of seeing where the partnership can go.

Loerien Gamaroff, CEO of Bankymoon, said:

“This is because the Reserve Bank is very hesitant to give a stamp of approval on anything that comes out. The sandbox will only be bitcoin focused during this initial phase, but is focused on applying broad regulations to all cryptocurrencies.”

He adds, though, that it will give a formal foundation to bitcoin, which people will be able to trust.

“I think the regulation will move things along and make people on the street comfortable with bitcoin. With these new regulations, these everyday people can now trust that bitcoin is not just for hackers and criminals.”

The bank has, in the past, expressed its interest in blockchain and digital currencies. So much so, that the bank’s governor stated that it was willing to consider the benefits that the technology could present.

At the time, Lesetja Kganyago, the governor of SARB, said:

“As a central bank, we are open to innovations despite the different opinions of regulators on matters such as cryptocurrencies. We are willing to consider the merits and risks of blockchain technology and other distributed ledgers.”

Taking Small Steps

It remains to be seen what’s next for the central bank. However, the bank has already made significant progress so far. The fact that it has started proceedings into the regulation of digital currencies is a step forward. Nothing is going to happen overnight, but these steps remain positive for the country, which is seeing an increasing number of people using bitcoin for day-to-day purchases.

Featured image from Shutterstock.

Innovate UK Seeks Blockchain Pitches in £8 Million Startup Competition

A U.K. government agency is reaching out to blockchain startups in a competition that is focused on digital health solutions.

In a notice from Innovate UK, a nondepartmental public office that is designed to promote innovation through grants and investments, it is offering up to £8 million for U.K. businesses to work on innovation projects that tackle the biggest healthcare challenges.

The competition is being run through the digital health technology catalyst, which is part of the Industrial Strategy Challenge Fund. It’s designed to support the creation of digital health products that meet the requirements of the NHS. This is part of a new £35 million funding programme over four years.

According to Innovate UK, ‘digital health promises to have a profound impact on the approach, delivery and administration of healthcare, for the benefit of patients.’

In its notice, it said:

“The types of digital health projects we will fund include (but are not limited to) … emerging digital health technologies with a demonstrated healthcare benefit, such as artificial intelligence, machine learning, augmented reality, blockchain and the Internet of Things.”

The competition opens today (31st July) and runs until the 11th October at 12 p.m.; however, the deadline for registrations is the 4th October, 2017. Applicants will be notified on the 17th October.

It’s only open to U.K.-based firms and projects must start by the 1st February, 2018.

Innovate UK stipulate that feasibility projects must range in size from total project costs of £50,000 to £75,000 and need to be completed within one year.

Whereas industrial research and experimental development projects must range in size from total project costs of £500,000 to £1 million and need to be completed within three years.

According to the government agency,

“[Projects] must have the potential to achieve one or more of the following:

  • improve patient outcomes

  • transform healthcare delivery

  • enable more efficient delivery of healthcare.”

It adds:

“In this competition we won’t fund projects that:

  • don’t have digital technology as the project core

  • focus on developing medical devices (unless enabled using digital technology as a core component)

  • seek to discover or develop medicines

  • seek only to develop data or record-keeping systems.”

The aim of the competition is to speed up the development of innovative digital solutions that can be utilised for healthcare challenges, thus helping the sector to grow.

Funding Projects through Innovate UK

This isn’t the first time that Innovate UK has funded projects in the past.

In 2016, the government agency awarded £248,000 to a startup that was building a cross-border payments tool using the ethereum technology.

According to a report from CoinDesk, the money was awarded to London-based Tramonex where the money was reported to be used to further the development of its cross-border blockchain tool.

At the time, Tramonex co-founder and CEO Amine Berraoui said:

“We are quite advanced in our prototype already, it’s more about looking for different approaches to handle the technology. Then to develop the commercial clients.”

Once completed the prototype will be submitted to the U.K.’s Financial Conduct Authority (FCA) for approval.

Last September, Innovate UK launched a new blockchain project in a £15 million competition. In the government’s Emerging and Enabling Technologies Programme, Innovate UK were seeking to ‘identify and speed up’ technology by providing funds worth up to £15 million.

According to the competition description, it reads:

“Our aim is to inspire the new products, processes and services of tomorrow; those with the potential to unlock billions of pounds of value to industry and disrupt existing markets.”

The aim of this competition is to help businesses broaden out innovation activities, to find new sources of revenue from new products, processes or services.

Just through these competitions and projects it shows how important new technologies such as the blockchain is to Innovate UK and how much they want the country to harness its potentials.

Competitions Provide Boost to Innovative Solutions

There are several competitions taking place that are aiming to find the next big thing in the blockchain space.

In Hong Kong, a technology programme is hoping to unearth the next fintech blockbuster. In a report from the South China Morning Post, 10 technology startups have been selected for a 12-week mentorship programme that is backed by 18 major financial establishments.

These include companies from Hong Kong, South Korea, Singapore and the United States, who are aiming to implement innovation that could aid financial institutions within the Asia-Pacific.

Accenture’s FinTech Innovation Lab Asia-Pacific is who picked the 10 technology startups.

Evangelos Kotsovinos, the Asia head of infrastructure and China chief information officer for Morgan Stanley, said:

“Asia provides unique challenges and opportunities that are driving true fintech innovation here.”

“Working with labs such as Accenture’s is a great way for Morgan Stanley to identify technologies that can help us grow and evolve our business, but also to give back to the community by advising start-ups on how to commercialise their technology to meet the demands of a global financial services firm.”

According to the SCMP, some of the technology startups include Block, a South Korean blockchain infrastructure provider; CoverGo, a Hong Kong-based company that automates manual insurance processes; KapitalWise, a U.S. startup, that provides a micro-investment platform; and microUmbrella.com, which delivers a micro-insurance buying and claims platform.

Piyush Singh, Accenture’s senior managing director of financial services for Asia-Pacific, said:

“The financial institutions in the FinTech Innovation Lab Asia-Pacific select start-ups who are trying to address, in a practical manner, current real-world fintech challenges facing the industry.”

Now more than ever, financial firms need to maintain pace with the rate at which the technological world is developing. For it to ensure this, it must embrace fintech, but the only way for that to be achieved is for the finance sector to research new methods of doing things. To do so, means a more efficient system that is free from errors and cuts down on costs.

As the former CEO of Barclays once said, the financial services sector needs to open itself to fintech if it wishes to remain relevant.

Speaking at a Money 20/20 fintech conference in Copenhagen in June, Anthony Jenkins said:

“Banks can avoid [becoming irrelevant], but they have to act now, and what they really need to do is think about innovation, but also transformation, doing something radically different.”

Featured image from Shutterstock.