Signature Bank and JP Morgan Launch the First US Bank-Backed Crypto Tokens
When JP Morgan announced its rollout of the “JPM Coin”, the dollar-backed token was hailed as the first of its kind. However, it seems that Signature Bank was the first US Bank to back a crypto token with its January 2019 launch of the Signet Platform and “Signet” token.
The Signet Platform is a permissioned version of the Ethereum blockchain, meaning that Signature Bank operates the blockchain itself (no miners) and only its commercial clients have access to the network.
By processing transactions on the Signet Platform, the bank is able to make transfers 24 hours a day, seven days a week, and incur no transaction fees. The payments are also processed in real time using dollar-backed Signets and are just as secure due to the underlying Ethereum blockchain technology. To ensure efficiency and user qualification, participating in the Signet Platform requires a minimum account balance of $250,000. When Signature Bank launched the platform on January 1, it became the first FDIC-insured bank to launch its own blockchain technology for everyday transactions.
Fast forward to February 14, and JP Morgan announced that they would release a token of their own, dubbed the “JPM Coin”. Like Signets, JPM Coins are backed by the US Dollar and will be transacted on its own private blockchain. JPM laid out the details of how their system of payments will work:
JPM Coin is a digital coin representing United States Dollars held in designated accounts at JPMorgan Chase N.A. In short, a JPM Coin always has a value equivalent to one U.S. dollar. When one client sends money to another over the blockchain, JPM Coins are transferred and instantaneously redeemed for the equivalent amount of U.S. dollars, reducing the typical settlement time.
Due to the fact that JP Morgan transacts on such a large scale, only large institutional clients of the bank will have access to the blockchain platform.
According to Umar Farooq – the head of blockchain initiatives at JPM – the three most anticipated use cases for JPM Coins are international payments, securities transactions, and JP Morgan’s treasury services for large corporations.
Jack Dorsey Is Supportive of Lightning Network
In the past month, Jack Dorsey has repeatedly demonstrated strong interest in Lightning Network. The Bitcoin-payment protocol aims to solve its scalability issues by enabling off-blockchain transactions for virtually no fees, and its use has exploded in recent months.
On February 5, the Twitter and Square CEO participated in the passing of the Lightning torch, during which participants sent Lightning bitcoin payments of growing value to each other – the torch was worth over $100 in bitcoin when Jack Dorsey passed it on to Lightning Labs CEO Elizabeth Stark.
Later this month, he joined Stephan Livera’s podcast with Elizabeth Stark to discuss Bitcoin, the Lightning torch, and his thoughts on Lightning integration for Twitter and the Cash App, which Square developed.
On the topic of Twitter integration, Dorsey said that the Twitter team has been discussing Lightning integration for a while now, and thinks it could solve a lot of their issues by offering more incentive to content producers aside from reach alone. Tippin, the web-based crypto wallet company, has already released a chrome extension that enables Lightning integration into Twitter and it appears official support from Twitter may be well on its way.
When asked about future Lightning integration into the Cash App, Dorsey said that it is “a matter of when, not if”. Lightning integration into Cash App would open the door for merchant acceptance of bitcoin payments and serve as a crucial first step towards Bitcoin’s viability as a means-of-payment.
Morgan Stanley Acquires Solium Capital for $900 Million
According to Wall Street Journal, the deal is the “largest takeover by any major Wall Street firm since the crisis” (Liz Hoffman). Morgan Stanley has been working with the stock-plan management FinTech since 2016, when it integrated Solium’s equity administration software into its own employee stock-plan business. By making the historic acquisition, Morgan Stanley hopes to capitalize on Solium’s extensive network of clients and convert them into Morgan Stanley clients as well.
Morgan Stanley already offers stock-plan management services to over 300 corporate clients, but those clients are primarily top executives. Meanwhile, Solium has attracted the business of over 3,000 corporate clients, and many of them are young start-up employees that aren’t yet tied to any retail bank. Morgan Stanley believes that the operational efficiencies and customer growth that they can achieve from the deal justifies the hefty price tag.
US Pension Funds Invest in Crypto
In February, Morgan Creek Capital Management LLC launched a new venture-capital fund, “Morgan Creek Digital”, aimed at capturing the growth of the crypto space. The founder of the new fund, Anthony Pompliano, says the fund will do so by investing in the equity of companies involved with blockchain technology and digital assets (ex. Coinbase), as well as holding small positions in the more liquid crypto assets on the market, such as Bitcoin and Ethereum.
Pompliano revealed the other week that among the anchor investors were two pension plans based out of Fairfax County, Virginia, in what is speculated to be the first crypto asset investment by a US Pension Fund. Pompliano added that other investors include an “insurance company, a hospital system, a university endowment and a private foundation.”
The last year has seen several institutional investors and university endowments alike dive into the crypto space. Yale allocated some of its endowment to the crypto hedge fund, Paradigm, in October 2018 and the University of Michigan is considering investing even more into Andreessen Horowitz’s crypto asset fund after contributing $3 million in June 2018. Whenever the next bull market occurs, it’s becoming clear that it will be fueled by more qualified investors than in 2017.
Coinbase Makes Two New Acquisitions
On February 19th Coinbase, the largest US-based cryptocurrency exchange, announced the acquisition of Neutrino. According to the crypto exchange, the acquisition will help fortify security for various Coinbase services as stated per this press release:
Blockchain intelligence is increasingly important in the crypto ecosystem and is necessary to achieve our mission of bringing the open financial system to the world. By analyzing data on public blockchains, Neutrino will help us prevent theft of funds from peoples’ accounts, investigate ransomware attacks, and identify bad actors. It will also help us bring more cryptocurrencies and features to more people while helping ensure compliance with local laws and regulations.
However, this move was not made without controversy, as a fierce minority of Coinbase enthusiasts challenged the acquisition due to the past history of Neutrino’s founders: Giancarlo Russo, Marco Valleri, and Alberto Ornaghi. Before Neutrino, the three engineers were executives at Hacking Team, a start-up that specialized in the sale of spyware software to various foreign governments. In response, Coinbase released a presser defending the move:
We are aware that Neutrino’s co-founders previously worked at Hacking Team, which we reviewed as part of our security, technical, and hiring diligence. Coinbase does not condone nor will it defend the actions of Hacking Team. Increasingly, third-party blockchain analysis companies are requesting customer data from cryptocurrency companies that they serve.”
Coinbase also recently announced the purchase of Blockspring, a San Francisco based startup that allows tech developers to collect and process data from APIs (Application Programming Interface).
The newly acquired startup provides API data to companies with various different applications such as Financial Reporting, Marketing and Sales.