Warren Buffett’s Holding Invests $600 Mln in Fintech Firms Focused on Emerging Markets

Multinational holding conglomerate Berkshire Hathaway – which counts outspoken crypto critic Warren Buffett as its CEO and chairman – has invested around $600 million in two fintech payment firms focused on emerging markets, the Wall Street Journal (WSJ) reported Oct. 29.

Both investments are said to have been spearheaded by one of Berkshire’s two portfolio managers, Todd Combs. In August, Berkshire is reported to have bought a roughly $300 million stake in the parent company of Paytm, India’s largest mobile-payments service.

The second investment was made just this past week, through the purchase of shares in an initial public offering (IPO) for Brazilian payments processor StoneCo, the country’s fourth-largest by volume.

The WSJ underscores that both decisions mark something of a departure for Berkshire, which  which has $711.932 billion in assets under management as of 2018, and is best-known for its investments in blue-chip firms such as Coca-Cola and acquisitions of utilities and insurance firms.

Buffett has in the past said that tech investments are beyond his area of expertise, WSJ notes.

That tech is not within Buffett’s “circle of competence” was affirmed by self-professed Buffett disciple venture capitalist Chamath Palihapitiya this spring, when he took his icon to task for his virulent anti-crypto stance.

Combs, alongside Berkshire’s second portfolio manager Ted Weschler, are nonetheless reported to be “widening the net” of the conglomerate: yet, as WSJ highlights, both Stone and Paytm are considered to be established companies, which dominate their respective local markets and operate in tightly regulated industries.

The WSJ says Berkshire’s backing is a sign of the “maturity” of the fintech sector, which reportedly raised almost $35 billion in venture capital during the first three quarters of 2018.

Berkshire’s move to put major capital into two fintech firms that target emerging markets squares uneasily with the vocal position of Buffett, who has become notorious in fintech and crypto circles for castigating Bitcoin (BTC) as being “rat poison-squared.” He has made repeated statements claiming that Bitcoin is neither a currency, nor a way of investing. In October 2017, Buffet predicted that Bitcoin had entered the “bubble territory,” and was set “to implode.”

India saw soaring demand for cryptocurrencies during the period of economic turmoil that followed its prime minister’s bold — and still highly contentious — demonetization policy in late 2016. Crypto’s popularity continued through 2017, eliciting a controversial anti-crypto crackdown from the country’s central bank (RBI) this April, which has prompted both public and industry-led petitions.

As a final verdict on the RBI ban continues to be repeatedly stayed, the judiciary has now thrown the ball back in the executive’s court, setting a deadline for the government to clarify and finally cement its official position on crypto by mid-November.

This month, in Brazil, the country’s largest brokerage has revealed it will launch a Bitcoin and Ethereum (ETH) exchange, saying it was pushed into the crypto business by the popularity of the asset class among investors.

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Shanghai Stock Exchange Partners With Major Insurance Firms to Improve Industry With Blockchain

The Shanghai Stock Exchange (SSE) and Insurance Asset Management Association of China (IAMAC) have agreed to cooperate on improving the insurance and pension industries with the use of blockchain tech. China Securities Journal newspaper reported on the partnership Monday, August 20.

China Securities Journal wrote that the SSE, the world’s fourth largest stock exchange, was joined by several major insurance industry players, including the IAMAC, Changjiang Pension Insurance Company, Tokyo Maritime Sunshine, and others.

The stated goal of the new group is “to create a new, high-efficiency, low-cost and safer insurance industry” through the use of blockchain technology. The article clarifies:

“The digital transformation of enabling insurance will build a blockchain service platform to solve the bottleneck problem of enterprise innovation. With convenient and efficient application development, flexible deployment mode and visual monitoring and operation platform.”

As Cointelegraph reported July 12, the Shanghai Stock Exchange had revealed its plans to use blockchain in its securities transactions, indicating the increasing level of adoption of the distributed ledger technology (DLT) by larger institutions.

Last week, a major U.S.-based entrepreneurial accelerator Y Combinator announced the launch of its new China-based division to “build a long-term local organization that will combine the best of Silicon Valley and China and create a lot of innovation.”

Earlier this month, Intercontinental Exchange (ICE), which operates the New York Stock Exchange (NYSE), has unveiled its plans to build an “open and regulated, global ecosystem for digital assets” in cooperation with Microsoft and others.

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Japanese Firms Jointly Launch Corporate Crypto Accounting Tool

Taxes

Cryptolinc Co. Ltd, which develops and provides cryptocurrency management and calculation systems, and Miroku Information Service Co. Ltd, a financial and accounting system management and information service, have jointly created a crypto corporate accounting tool for corporate cryptocurrency accounting.

Also Read: Japan Tax Agency Says Individuals Earning $1,800+ in Crypto a Year Will Declare Tax

Cryptolinc Corporate Accounting Shares Data in Collaboration with Accounting Firm

Through a collaboration, cryptocurrency transaction data will be incorporated into the financial and accounting system of Miroku Information Service, enabling an appropriate and complicated accounting process to be carried out smoothly, the companies explained in a statement.

By realizing a seamless data linkage with an API connection to Cryptolinc Corporate Accounting, the software should drastically help accounting companies to process corporate tax returns for cryptocurrency transactions, which are expected to increase in the near future.

Transaction Data to Be Collected From Each Exchange

“Cryptolinc Corporate Accounting beta version can prepare an income and expense calculation after uploading transaction data from each cryptocurrency exchanges,” the companies said in a joint statement. “[It] can capture data and insert it into an accounting software, such as the one Miroku Information Service provides. This is the first tool for corporate cryptocurrency accounting in Japan.”

With the crypto market having expanded rapidly in Japan, by March of this year the ASBJ, (Accounting Standards Board of Japan) issued the Practical Solution on the Accounting for Virtual Currencies under the Payment Services Act, which attracted everyone’s attention to accounting issues for crypto. However, calculating expenses and losses in virtual currencies is extremely complicated and takes a lot of time. Many accounting firms and corporate accountants are struggling to respond to such demand.

Japanese Firms Jointly Launch a Corporate Crypto Accounting Tool

“We focus on accounting of cryptocurrency transactions and we publicize them. When calculating income and expenses in crypto, it is difficult to calculate the difference between profit and loss, many accountants are struggling to respond to that,” Cryptolinc said.

What the software offers is management of transaction data collected through multiple crypto exchanges in a centralized way, and easy calculation of income and expense. Accounting data and results are collected by Cryptolinc Corporate Accounting, and in accordance with Japanese accounting standards, the data will be incorporated into the financial and accounting system of Miroku Information Service in a way that will allegedly satisfy tax compliance, enabling appropriate accounting and tax filing.

What do you think of corporate accounting firms using data shared by crypto exchanges? Share your thoughts in the comments section below.


Images courtesy of Shutterstock and CryptoLinc Ltd. Co.


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Indian State of Telangana to Sign MoUs With Blockchain Firms, Streamline Gov’t Services

The Indian state of Telangana announced it will sign several memoranda of understanding (MoUs) with blockchain firms as to eventually implement the technology in state applications, local Indian news agency the Business Standard reports July 26.

Telangana IT Secretary Jayesh Ranjan revealed that the state is planning to enter into MoUs with a number of blockchain-focused firms in order to implement the technology in “six or seven government applications.”

According to the government official, the measure aims to bring more transparency and efficiency to public services provided by the state. However, Ranjan did not specify what areas of state services would be affected by the upcoming blockchain deployments.

Speaking at an official press conference for the 1st edition of the International Blockchain Congress July 26, Ranjan claimed that the state is set to sign the agreements during the event.

The International Blockchain Congress will be held at Telangana’s capital Hyderabad from Aug. 3 till 4. The finishing day of the event is set to be hold in Goa on Aug. 5. The upcoming event is expected to be attended by more than 3,000 participants, featuring over 80 speakers including officials in regional governments and U.S. billionaire tech investor Tim Draper.

Draper re-entered the Indian market in February 2017, having left in 2016 due to an alleged lack of “rule of law,” prompting Draper Fisher Jurvetson to sell their entire Indian portfolio. While impressed by Prime Minister Narendra Modi’s anti-corruption initiatives in the country, the tech investor has criticized India’s negative stance on cryptocurrencies.

State and municipal governments have increasingly been adopting blockchain technology to make their operations more secure and efficient. On July 25, the Government of Catalonia revealed its plans to implement blockchain tech in all areas of public administration by the end of 2018. The Generalitat de Catalunya wants to promote the technology “with the aim of improving digital services to the public and promoting the potential of this technology between the Administration, companies and the citizen[s].”

Earlier this month, the Riyadh Municipality in Saudi Arabia, teamed up with tech giant IBM to develop a strategy for enhancing government services and transactions through the use of blockchain tech. The partnership was made in accordance with a decision by the Government of Saudi Arabia to work on improving the quality of municipal services and integrate leading technologies as part of the Saudi Vision 2030 program.

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Yes, Stablecoins Can Secure Official Audits from Major Firms

“We have nothing to hide,” says Tory Reiss, VP of corporate development at TrustToken. Like the market’s most popular stablecoin, Tether, TrustToken’s TrueUSD is fiat-collateralized. Under this model, each token (in theory) should be backed 1:1 with a corresponding dollar in a related bank account.

This model may not play out in practice as it does in theory, however. In a recent interview with Bitcoin Magazine, Reiss’s comment summarizes the bulk of his answer to our first question: How is TrueUSD different from Tether?

A Different Approach to Fiat-Backed Stability

Unlike Tether, which plays custodian, issuer and representative for all tokens and their congenital funds, Reiss explains that TrustToken has no control over the network’s monetary flow.

“There are a few pretty major components,” he began. “To be honest, the biggest difference — when we started the businesses, we spent a lot of time architecting legal framework and also financial framework in terms of where the funds are held and how they’re held, which was built around removing us, the company, from the flow of funds and protecting all the token holders in a legal manner from us being able to withdraw or access their funds.”

Instead, a combination of smart contracts, escrow accounts and fiduciary partners manage token supply and issuance. TrustToken’s fiduciary partners include the Nevada-based Alliance Trust Company and Prime Trust (which also banks for the stablecoin Stronghold USD), and these firms leverage smart contracts to mint and buy back tokens. Whenever a new user wants to mint fresh TrueUSD, they can wire money to one of these trusts, and once the funds are settled into the trust’s bank accounts, the smart contract mints new tokens and issues them to the user. To redeem tokens, users burn them through a smart contract, and the respective trust then wires the user the corresponding funds.

“We have a dashboard that we’ve built for our fiduciary partners. Only after they’ve received those funds and they’ve settled for 24 hours can those partners go onto the dashboard and mark that transaction as settled to mint new tokens,” Reiss explained. “We act on behalf of the token holder but, as a business, we can’t access those funds.”

This process allows TrustToken to be as hands-off as possible while also providing them with the code-certain protections of smart contracts and the reliability of a central source of liquidity and asset management.

The system is a more complex version of Tether’s own with more working parts. In fact, Reiss suggested that his team viewed Tether as a sort of working model for what not to do, highlighting the need for clear legal and financial safety nets for its users.

“We learned from Tether’s mistakes in the sense that they put none of those legal protections in place. They hold all of their funds in an omnibus account where they can essentially do whatever they please with the money in that account. In our case, we could never preprint TrueUSD or have a disparity between funds in the accounts and tokens on the chain,” he stated.

Tether has come under fire for its printing/issuance practices in the past. Critics have long speculated that Tether does not have parity between the dollars in its bank accounts and on-chain tokens. Researchers at the University of Texas, Austin, even released a report in June of this year that seems to corroborate this suspicion, laying out evidence that suggests that Tether may have been used to artificially inflate bitcoin’s price during 2017’s bull market.

The smart contracts prevent TrustToken or its partners from preprinting TrueUSD without having dollars to back them. Funds have to hit the trust’s bank account and sit for 24 hours before the smart contract will mint new tokens.

Even if the smart contract didn’t police token issuance, TrueUSD’s accounts would, Reiss claimed. If at any point during their professional relationship the token’s auditor found a discrepancy in supply and fiat reserves, the partnership would terminate.

“We have one top-50 accounting partner (Cohen & Company) that is performing attestation. When they look at your books, they look at all of your transactions. And if your account isn’t in line from day zero, they won’t maintain an audit account.”

Reiss believes that, whether Tether won’t submit to an audit for fear of this outcome or has had a relationship terminated because of a discrepancy, this is why the world’s most popular stablecoin has no official audit on record.

“That’s most likely the case why Tether can’t have a true audit partner — but in our case it’s worked in our favor because we have nothing to hide.”

Tether has never submitted itself to an official audit by any certified accounting firm. The company claims that it’s not out of defiance; it’s simply because no firm is willing to take a risk working with a cryptocurrency company given the industry’s stigmatized connection to money laundering, tax evasion and the dark web. An audit by one of the U.S.’s big four (Deloitte, Ernst & Young, PwC and KPMG), the team claims, is especially elusive.

In lieu of an official audit, Tether has conducted a financial review by Freeh Sporkin & Sullivan LLP, a law firm co-founded by former FBI Director Louis Freeh.

The Other Side of the Coin

TrueUSD’s operations tell another story. Not only does Cohen & Company currently conduct audits for the currency, but Reiss indicated in our interview that TrustToken is in talks with two of the big four accounting firms to provide audits in the future.

TrustToken also publishes regular attestations from Cohen & Company’s audits on their Medium blog. When they strike a working relationship with one of the big four, the company plans to publish “live attestations (via a public dashboard),” Reiss claimed.

Throughout the interview, Reiss repeatedly iterated that the company is operating in the open. Furthermore, because TrustToken is also playing ball with regulators, the company claims to have close-at-hand opportunities to expand its services.

“Our project is working entirely with U.S. securities laws and also those in Europe, Asia and South America. We’re aiming to build a compliant system that works within the existing regulatory regime but which hopefully expands access,” Reiss said.

This expansion will look to bring the stablecoin model “to European and Asian currencies this quarter,” he continued, also revealing that the company is “aiming for a half dozen [exchange listings] in the next month or so.” Currently, TrueUSD is offered on Binance, HBUS, Bittrex and Cryptopia, among others.

TrustToken has earned funding from Andreessen Horowitz’s a16z crypto, Foundation Capital and Founders Fund, among others. The company has also pooled talent from the likes of Facebook, Airbnb, PayPal, Google and Goldman Sachs.

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Vietnamese Regulator Tells Firms and Funds to Stay Away From Crypto

Regulation

Vietnam’s securities watchdog has required local businesses not to engage in transactions with cryptocurrencies. The announcement follows a directive issued by the country’s prime minister earlier this year aimed at tightening what Vietnamese regulators call the management of crypto activities.

Also read: China Releases Ranking of 31 Crypto Projects

Securities Watchdog Asks Companies to Obey AML Rules

The State Securities Commission of Vietnam (SSC) has required relevant companies and funds not to engage in any issuance, transaction or brokerage activities related to cryptocurrencies. The measure, referred to by local media as a ban, affects public companies, securities companies, fund management firms and securities investment funds. They have also been asked to obey anti-money laundering (AML) regulations.

Vietnamese Regulator Tells Firms and Funds to Stay Away From Crypto

According to the SSC, the announcement is based on Directive No 10/CT-TTg signed on April 11 by Vietnam’s Prime Minister, Nguyen Xuan Phuc, Viet Nam News reported. The document puts an emphasis on strengthening the management of activities related to bitcoin and other cryptocurrencies. The outlet also notes that the use of digital currencies is prohibited in Vietnam.

Not the First Anti-Crypto Measure

This is not the first administrative measure aimed at curbing crypto activities in the country. In April, the State Bank of Vietnam (SBV) banned commercial banks, payment services providers and intermediaries from making transactions involving cryptocurrencies. The central bank also issued a warning stating that such activities may increase the risks of money laundering, terrorism financing, trade fraud and tax evasion.

Vietnamese Regulator Tells Firms and Funds to Stay Away From CryptoLast October, the SBV declared that cryptos do not represent a “lawful means of payment” in the Asian country. Its proposals in that respect, which were submitted to the government in Hanoi, included a ban on the issuance, distribution, and use of cryptocurrencies as well as criminal prosecution and fines for their users.

Recently, citing the familiar argument – the need to improve the management of cryptocurrencies in Vietnam – the Ministry of Finance, the Ministry of Industry and Trade, and the SBV reached an agreement to suspend the import of crypto mining equipment. The proposal came from the Finance Ministry in June, as news.Bitcoin.com reported.

Fraud and Scam in Vietnam

Vietnamese Regulator Tells Firms and Funds to Stay Away From CryptoIn the past couple of years, the Vietnamese mining sector has been growing rapidly leading to a significant increase in the number of imported mining rigs. Digital coin minting, however, has caused concern in Hanoi. In May, close to 150 Vietnamese government agencies, financial institutions and businesses took part in a large cyber-security drill aimed at preventing the spread of mining malware.

Crypto-related fraud has played a role in shaping the current attitude of Vietnamese authorities and regulators towards the crypto space. The country recently had to deal with one of the largest scams in crypto history in which more than 30,000 people were defrauded into investing in the Ifan and Pincoin currencies.

What are your expectations for the future of cryptocurrencies in Vietnam? Share your thoughts in the comments section below.


Images courtesy of Shutterstock and the SSC.


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FINMA Seeks to Stem Exodus of Swiss Cryptocurrency Firms

Finance

The Swiss Financial Market Supervisory Authority (FINMA) has met with representatives of the country’s banking sector in the hopes of stemming a nascent exodus among cryptocurrency companies from Switzerland. The companies’ departures have been attributed to two Swiss banks’ decisions to no longer provide financial services to businesses dealing with virtual currencies.

Also Read: India Exchange Unocoin Suspends Withdrawals Following Central Bank Demands

FINMA Acts to Prevent Crypto Exodus

FINMA Seeks to Stem Exodus of Swiss Cryptocurrency FirmsSwitzerland’s financial regulators are taking steps intended to stem the perceived exodus of cryptocurrency companies from the nation, recently holding discussions with the Swiss National Bank and bankers’ association on how to increase the accessibility of financial services to cryptocurrency ventures.

As it stands, many analysts have predicted that many companies operating with virtual currencies will continue to leave Switzerland in favor of jurisdictions whose financial institutions are more amenable to crypto companies, including Liechtenstein, Gibraltar and the Cayman Islands.

Officials Seek to Preserve Swiss Crypto Industry

Despite cryptocurrency-related activities comprising a small portion of Switzerland’s financial industries, Swiss officials are viewing the country’s virtual currency as a valuable asset that should be preserved.

The finance director of Zug – a Swiss canton has been dubbed “Crypto Valley” following the establishment of between 200 and 300 virtual currency companies in the jurisdiction during recent years – Heinz Taennler, has warned that the crypto exodus may continue should the government fail to take action to guarantee the provision of financial services firms operating with virtual currencies.

“All their banking relationships are going to Liechtenstein,” Mr. Taennler stated. “There are hundreds of jobs that have been created, and every job is important.”

Virtual Currency Firms Appeal to Central Bank

According to Thomas Moser, an alternate member of the governing board of the Swiss National Bank, several cryptocurrency companies appealed to the country’s central bank regarding concerns pertaining to the provision of financial services to the sector.

Mr. Moser stated that “They raised concerns about problems with opening bank accounts, which was a worry for them, and asked for help. I said this was not something the [Swiss National Bank] dealt with, but they should speak with FINMA.”

“We would not want to close the door on the opportunities that such innovation (cryptocurrencies) might bring,” Moser added.

Do you think that Swiss crypto firms will continue to seek alternative jurisdictions? Join the discussion in the comments section below!


Images courtesy of Shutterstock


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Bitcoin Mining Firms Make Chinese Unicorns List for First Time

Three bitcoin mining companies have joined a list of “unicorns” – private companies valued at over $1 billion – for the first time.

The Shanghai-based Hurun Research Institute published its Q2 Unicorn Index for the Greater China region on Wednesday, which notably included the names of several major bitcoin mining firms: Bitmain, Canaan Creative and Ebang. The third Hurun list of 130 Chinese unicorns has never before featured a fully cryptocurrency-focused firm.

Ranking highest of the three, Bitmain appears at 13th on the list with a valuation of around 70 billion yuan, or about $10.4 billion, close to other notable companies such as JD Logistics.

The ranking follows recent news indicating that Bitmain has completed a Series B round funding that could value the firm around $10 billion ahead of a potential initial public offering (IPO).

Meanwhile, Hurun values Canaan and Ebang at around $3 billion and $1.5 billion, respectively – figures that saw the firms placed at at 32nd and 53rd on the list, also respectively.

Recent reports have indicated that Canaan and Ebang too have both filed applications to go public on the Hong Kong Stock Exchange. However, since the IPO applications were in initial draft form, it is unclear how much the two were seeking to raise or what their valuations might be. According to a previous report from Reuters, in mid-2017, Canaan was estimated to be worth around $500 million.

While the three are the first fully devoted bitcoin firms to appear on the Greater China Unicorn Index, some of the companies already on the list have already made major moves in the blockchain industry.

For instance, Ant Financial – a payment affiliate of Alibaba that tops the list with a valuation of $149 billion – announced late last month that it has launched a blockchain-powered payment corridor between Hong Kong and the Philippines.

Further, OneConnect – a fintech development arm of Chinese insurance giant PingAn and valued at $7.4 billion – has helped the Hong Kong Monetary Authority engineer a blockchain trade finance platform that is set to go live by September.

Paper unicorns image via Shutterstock

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