Mass adoption of blockchain-based platforms in finance, from trade finance to cross-border payments, still evokes the Chinese expression, “castles in the air”. But one of the world’s biggest messenger-app companies, Line, says mass adoption is close, and it’s putting money against seeing this come true.
Gaming, for example, is experiencing early production using decentralized applications, said Sabrina Tachdjian, head of investments at Unblock Ventures – Line’s investment arm dedicated to digital assets, launched last July with an initial funding of US$10 million.
Japan-based Line is owned by South Korean internet giant Naver. Both countries are seen as friendly for blockchain and crypto developers. Line declared its vision of a tokenized economy last year. Since then it has launched a cryptocurrency exchange, BITBOX, as well as its own cryptocurrency, Link, which operates on a proprietary blockchain, Link Chain.
Unblock Ventures so far has invested in four projects, plus CMCC Global, a fund investing in cryptocurrencies. Deployment of capital slowed in 2018 as the entire crypto space suffered a crash, but Tachdjian says the pace of investments is increasing again.
The aim of Unblock’s investments is to back companies with a shot at building a huge user base. “Mass adoption is the most important factor,” she said. “We look at projects that provide a tangible improvement in user experience.”
Mass adoption is the most important factorSabrina Tachdjian, Line
This is in contrast to bank-backed projects using blockchain, such as for letters of credit trading or mortgage lending. Executives at firms such as HSBC and J.P. Morgan say full deployment of their blockchain projects remains three to five years away. Unblock Ventures is looking at much faster bangs for its bucks.
Therefore, its investments are shying away from traditional financial applications, where regulation is a huge barrier to startups, particularly those out to disrupt the sector.
Outside of financial services, though, the barriers are technological, but these are being solved, notably scalability. “We’re close to production level,” she said of these other investments.
Virtual building blocks
For example, Line wants gamers to use its cryptocurrency, Link, to buy virtual weapons or trade in virtual reality with other gamers. Cryptocurrency can also serve as loyalty rewards for users in Line’s network.
This concept is similar to Tencent’s QQ coins. But Line envisions a use case on dApps (decentralised applications) instead of on a centralised server, which means even if Line were hacked or shut down the business, users can continue to run the service.
“DApps are peer to peer applications. It won’t be controlled by one central party,” said Paul Sin, Deloitte’s Asia Pacific blockchain lab leader.
So far Link has released several dApps on Link Chain, including Wizball (a Q&A-based knowledge-sharing platform), Pasha (A.I.-based image search), and 4CAST (futures forecasts). In other words it is accumulating the building blocks of search that Google pioneered for the World Wide Web, but aimed at a future of decentralized computing.
Digital rewards versus stablecoins
Line is building up a token economy. This ecosystem approach is in contrast to Facebook’s drive to use stablecoins to support payments on WhatsApp, a competing messaging app. It’s also different than other closed-loop networks, such as WeChat.
“Line aims to establish itself as a leading digital reward platform,” a company spokesperson told DigFin.
The idea is to create a social network in which posts, group chats, product reviews and data sharing is converted to nodes on a blockchain, with smart contracts guiding how users are rewarded for activity. Such loyalty points are expressed as tokens or digital assets that can be used to purchase real-world goods and services.
In other words, Line’s idea is to use blockchain to incentivize use of its marketplace without forcing users to remain inside; instead they are given forms of digital cash that can be spent in a variety of places.
Three projects Tachdjian has invested focus on this aspect.
Airbloc and Carry protocol, two Korean investee companies enable sharing of customer data. Upon giving consent for data to be shared, and probably accept having advertisements aimed their way, users can win reward tokens that can be converted into real-world goods, such as coffee coupons.
Carry claims to have 15 million users in Korea and Japan.
Zeex, another of Unblock Venture’s portfolio companies, lets consumers use cryptocurrency to buy products online from a range of sellers, from Amazon to Nike. (Zeex is a spinoff of a European gift card company, Zeek Group.)
Tachdjian hopes to see these tech companies explore use cases on Link Chain, which could lead to broader cooperation.
“Blockchain allows us to expand our ecosystem to include third parties in ways that were not possible before,” says the spokesperson.
In addition to startups, Line can potentially partner with Big Tech players experimenting with dApps. For example, both Samsung and Huawei have released mobile handsets with built-in e-wallets that can handle crypto.
Such hopes are why Line decided to build its own blockchain protocol, rather than use an existing infrastructure such as Ethereum. Line wanted a platform built around its loyalty programs.
NexChange, Horton Point launch digital asset market
The aim is to create an environment for investors to build and manage portfolios.
Asia-based blockchain venture firm NexChange Group announced a partnership with New York alternative investment firm, Horton Point, to launch a marketplace for the institutional digital asset management industry.
The Nexyst platform will provide access to a broad range of professionally managed, actively traded crypto strategies and passive investment solutions. Nexyst will debut its initial offering in October 2019.
Nexyst is created to provide better transparency and to improve investment decisions for institutional investors interested in the digital currency asset class.
The platform will enable qualified investors to perform online fund sourcing, due diligence and monitoring, and customize portfolios by a number of parameters such as risk, return, correlation and drawdowns. Nexyst utilizes proprietary optimization technology powered by Eleven Marketplace OS to deliver customized portfolio solutions to each investor.
Nexyst will also provide fund managers with integrated access to CRM, data room, behavioral analytics and customer engagement solutions for enhanced marketing and investor relations.
The Nexyst ecosystem is supported by an active global blockchain community developed by the NexChange Group. Horton Point is responsible for manager sourcing and due diligence. In addition to a transactional component, the platform will provide manager research, value-added content and tools enabling both sides to interact efficiently.
“Our goal is to create a one-stop platform where qualified investors and fund managers can actively engage with each other in a secure and compliant manner,” said NexChange Group CEO and Nexyst co-CEO, Juwan Lee.
The intent is to create an environment in which qualified investors can make informed decisions about this new asset class, said Nexyst co-CEO and Horton Point CEO Dimitri Sogoloff.
OKEx seeks global standards for crypto exchanges
OKEx seeks partners to develop a global self-regulated organization aimed at standardizing practices.
OKEx, one of the world’s largest spot and futures digital asset exchanges, announced an initiative to create a self-regulated organization (SRO) aimed at standardizing exchange practices and policies. Similar to the World Federation of Stock Exchanges, FINRA in the United States, and the World Economic Forum, OKEx is engaging exchanges and market participants in the global crypto-trading community to become members of this initiative.
This SRO will be an independent, membership-based organization that is neutral and open to exchanges of all sizes and jurisdictions. Member exchanges will work together to define and adopt standards that will promote digital asset adoption globally, educate governments and regulators, and develop metrics and criteria for trading, listings, and reporting.
“Cryptocurrencies are global and decentralized, and the industry remains nascent, thus regulations by jurisdiction are not enough,” said Andy Cheung, head of operations for Malta-based OKEx. “The only way for exchanges to grow and deliver impact is by joining together to develop practices and policies that will set a global standard and adapt to regional regulatory frameworks.”
Exchanges must clarify their operational practices and procedures in order to best cooperate with governments and encourage innovation in this sector.
OKEx invites other exchanges to join the company in establishing standards for market-making, listings, delistings of digital assets, and other items critical to the growth of the entire industry. Crypto exchanges share a common goal to protect investors and traders, and to foster innovation in the cryptocurrency ecosystem.
“While other organizations have introduced initiatives to elevate standards for crypto exchanges, most are focused on one jurisdiction. Our initiative is focused on creating a global SRO that can provide international standards,” said Enzo Villani, head of international strategy and innovation at OKEx.
SWIFT and HSBC to define API standards for Hong Kong
The new standard will ensure higher levels of interoperability and improve customer experience.
SWIFT and HSBC announce today they are joining forces to define a common industry standard JSON for APIs, re-using ISO 20022 components, the initiative will see the Hong Kong banking community working together to review and agree on this standard.
In July 2018, the Hong Kong Monetary Authority introduced its Open API Framework, to facilitate the development and broader adoption of APIs by the banking sector. Since its launch, over 500 APIs have been made available by the 20 participating banks.
The new standard allows merchants to setup direct debit authorization and initiate the collection instruction to bank on behalf of their consumers. This initiative by SWIFT and HSBC aims to avoid fragmentation on common use cases, speed up and ease API integration efforts and incremental investment for industry participants, and ensure interoperability with the Hong Kong Faster Payment System’s (HK FPS) underlying clearing and settlement system by reusing ISO 20022 as a standard.
ISO 20022 is already widely adopted by market infrastructures across the world, including HK FPS, and is set to become the new standard for cross-border payments in the years to come, making it a logical choice when adopting a new technology.
Lisa O’Connor, managing director, capital markets and standards, APAC said: “In recent years, the financial industry has moved from safe payments to fast payments, and is now embracing richer data payments as the world is moving towards Open Banking. In this context, the adoption of a common set of standards, such as ISO 20022, is a necessity to ensure interoperability between systems and reap the full benefits of Open APIs.”
Nadya Hijazi, head of digital, global liquidity and cash management at HSBC, said: “At HSBC we understand that the market is rapidly changing, with customers more technologically sophisticated and digitally oriented in their approach. We are thus committed to meeting the demands for an industry that is faster, more personalized and easily accessible. At HSBC we see immense value in defining an ISO 20022 JSON standard and have adopted these standards in our Treasury APIs for collections in Hong Kong.”