Cambodian Central Bank Is Trialing Blockchain Technology

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The National Bank of Cambodia (NBC) announced that it plans to launch a blockchain trial at the end of 2017 that aims to improve the central bank’s ability to monitor and facilitate interbank lending.

In April, the Cambodian central bank entered into a partnership with Japanese blockchain startup Soramitsu to co-develop the Hyperledger Iroha ledger to build a new payment infrastructure on top of distributed ledger technology. Hyperledger Iroha is an open-source blockchain software that allows users to store and transfer data as well as develop smart contracts, which makes it suitable for the development of digital payment systems.

However, the National Bank of Cambodia stated that it is not focusing on creating a new digital currency at this point. Instead, the new blockchain trial will aim to reduce the costs in Cambodia’s interbank lending market, according to a local news publication.

“We expect the new technology to provide smooth, efficient, safe and affordable interbank transactions which will ultimately benefit end users. At this stage we will focus on the operational functionality of the system, but we believe the system can further be customized with application development to benefit the [central] bank’s monetary policy, including the use of the local currency,” NBC Director-General Chea Serey told the Phnom Penh Post.

Having said that, Serey also mentioned that “a cashless system is less costly and more transparent for the whole economy. This has always been on our agenda, but we needed time to study the different platforms available,” suggesting that a digital Cambodian riel is not off the table in the future.

Serey further added that the National Bank of Cambodia’s motivation for developing blockchain solutions is to give the central bank greater control over the country’s monetary policy, which is constrained by the Kingdom’s heavy use of the U.S. dollar.

Central Banks Around the World Look to the Blockchain

The National Bank of Cambodia is not the only central bank looking at possible implementation of blockchain technology.

The People’s Bank of China, for example, announced in January that it has completed a blockchain trial for a new Chinese digital currency by digitizing the Chinese yuan and transacting with a range local banks. The Canadian central bank, the Bank of Canada, is also interested in what blockchain technology can offer, having run a similar trial to test blockchain-based digitized fiat currency for interbank payments.

The Bank of England is also exploring blockchain opportunities through its multi-year research program that explores the implication of central banks issuing digital currencies. For Bank of England Governor Mark Carney, the most interesting use case for blockchain technology is the securities settlement process. He called it “ripe for innovation.”

“A typical settlement chain involves many intermediaries, making it comparatively slow and keeping operational risks high. Industry has begun to work together to determine how distributed ledger technologies could be used to solve these issues at scale,” Carney added, speaking at a fintech conference in London in April.

Given the number of blockchain trials that central banks are conducting across the globe, it will not be surprising to see a wave of digitization of fiat currencies taking place in the years to come.

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More Universities Add Blockchain Courses to Meet Market Demand

More Universities Add Blockchain Courses to Meet Market Demand

In recent months, there has been a surge in the demand for blockchain professionals. Data from the professional networking site LinkedIn has shown that blockchain related job postings have tripled in the last 12 months. This shows that there is a high demand for blockchain experts as the potential and applicability of blockchain technology becomes more apparent to corporations. Recognizing this opportunity, several universities have added blockchain studies to their fields of study to tailor their educational offerings to these new developments in the job market.

The University of Edinburgh, for example, has recently announced the launch of a blockchain technology laboratory within its School of Informatics through a collaboration with technology startup Input Output Hong Kong (IOHK). The new lab will focus primarily on blockchain studies. However, related interdisciplinary research will be also encouraged.

Speaking at the launch of the blockchain technology lab, IOHK Co-Founder, Jeremy Wood stated: “IOHK’s partnership with the University of Edinburgh provides unique opportunities for current students to become the next generation of blockchain and cryptography leaders. As a headquarters for IOHK’s international academic research community, we expect to see the university facilitate innovative projects that drive how businesses and governments approach blockchain and cryptocurrencies.”

The University of Edinburgh now joins a small but growing list of educational institutions that are including courses on blockchain technology in their curricula.

Though the University of Edinburgh is the first to offer a blockchain course of this kind in the United Kingdom, universities in the U.S. have already been doing so for a while. Stanford University began offering a course on cryptocurrencies, blockchains and smart contracts two years ago, while the University of California, Berkeley also offers a blockchain course.

The Massachusetts Institute of Technology (MIT) is in the process of developing a course on the subject matter, while the University of Nicosia in Cyprus is offering the world’s first MSc in Digital Currency. The master’s degree covers all key areas of digital currencies such as regulation, cryptography and blockchain technology applications. Students can even pay the tuition fees for the degree in bitcoin.

There are also a number of online courses created to cater to the rising demand for blockchain expertise. Princeton University has partnered with online learning platform Coursera to provide an intensive 11-week course on bitcoin and cryptocurrency technology.

The Blockchain University and the B9lab also offer blockchain and cryptocurrency courses designed to cater to professionals who are seeking to improve their knowledge and have a competitive edge in the industry.

The CryptoCurrency Certification Consortium (C4) includes Andreas Antonopoulos, Vitalik Buterin, Pamela Morgan, Josh McDougall and Michael Perklin on its board of directors. It offers cryptocurrency courses and provides participants with professional certificates upon completion. Certified Bitcoin Professional (CBP), Certified Bitcoin Expert (CBE), and Certified Ethereum Developer (CED) are the three professional certifications available.

The rise in blockchain related courses both online and in leading educational institutions is a testament to growing confidence in the technology’s ability to disrupt industry in the future. Blockchain technology is now being recognized as an applicable solution to real world business challenges and that is reflected in both the job market as well as in educational courses on offer.

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E&Y Report: How the Wealth Management Industry Could Benefit from the Blockchain

E&Y Report: How the Wealth Management Industry Could Benefit from the Blockchain

Blockchain technology has morphed from a popular buzzword to a technology that is in the process of revamping a wide range of operational and business processes within the financial service industry. A segment of the financial industry that could benefit greatly from the implementation of the distributed ledger technology is the wealth and asset management sector.

The global accountancy firm Ernst & Young published a report on the benefits of blockchain technology for the wealth and asset management industry titled ‘Blockchain Innovation in Wealth and Asset Management.’ The report states that the implementation of blockchain technology would likely result in reduced operational expenses, elimination of redundant yet time consuming functions and more opportunities to better the client experience. More specifically, using blockchain technology in important areas such as the client onboarding process, the creation of model portfolios, the settling and clearing of trades and compliance processes related to AML regulations can all be improved by implementing distributed ledger technology-based solutions in the wealth management industry.

Blockchain Use Cases in Wealth Management

In this report, Ernst & Young highlights two use cases as examples of the benefits of the blockchain.

Firstly, blockchain technology can be applied to digitize and streamline the customer onboarding and profiling process. Strict regulatory requirements require wealth managers to collect information such as proof of identification, marital status, residency, sources of wealth and political ties from new potential clients. This can be a cumbersome, long-winded and, therefore, costly process.

If, instead, high net-worth individuals’ data were to be stored on a distributed ledger to which permissioned parties could gain access with the individual’s approval, then this would greatly reduce the time and cost of onboarding a new customer. Furthermore, due to the immutability and auditability of the blockchain, an audit trail could easily be kept for each client.

Secondly, the blockchain could facilitate the creation of portfolios and the communication of portfolio changes to clients. Currently, wealth managers use a variety of different platforms to create and maintain portfolios and most of these platforms do not enable direct communication with the client.

Hence, by developing and implementing a blockchain solution that allows wealth managers to create and manage portfolios according to clients’ stored investment constraints that also allows for direct communication with regarding portfolio changes, the entire investment process would be made substantially more efficient and client relationships could be deepened due to an increase in direct communication between the wealth manager and its clients.

There Will Be Hurdles for Adoption but First-Movers Will Benefit

The report also highlights the challenges of adoption that the technology is likely to encounter. Scalability, interoperability with legacy systems, security and accordance with technology standards were the largest issues raised by the firms polled by Ernst & Young.

In addition, wealth and asset management funds do not exist in a bubble and are usually interconnected with other firms. Therefore, a wide-scale adoption would likely take a long time, considering there would have to be a consensus as to what type of blockchain solutions the whole financial industry chooses to adopt. Due to these factors, most firms are currently only willing to test blockchain technology on a small scale before considering a broader adoption of the tech.

Ernst & Young, however, believes that firms that are the first to adopt blockchain technology will reap the lion’s share of its benefits. As the success of financial blockchain solutions depends on its participants, E&Y encourages firms to begin the innovation process early as first-movers are likely to benefit the most.

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Cryptocurrencies Boost Hedge Fund Returns But Managers Still Avoid Them

Cryptocurrencies Boosts Hedge Fund Returns But Fund Managers Still Avoid Them

Most hedge funds have had a poor start to the year. According to Hedge Fund Research, hedge fund portfolios gained only 3.5 percent in value from January to May of 2017, heavily underperforming the S&P 500 Index, which generated a return of 7 percent in the same time period.

Hedge funds are investment funds that can invest in a wide array of assets and adopt different types of investment strategies. Unlike mutual funds or pension funds, hedge funds are not constrained by regulatory requirements to primarily invest in stock and bonds and can, therefore, also invest in real estate, derivatives, and currencies, among other asset classes. This freedom of choice is what gives hedge funds a competitive advantage over traditional funds. For this ability to generate better returns, hedge funds charge a high annual management fee (usually 2 percent) as well as a performance fee. However, as witnessed in the first five months of 2017, these fees are not always warranted.

The HFRI Fund Weighted Composite Index, which is an equally weighted index that tracks the performance of hedge funds, is up only 0.5 percent in May, while the S&P 500 Index is up twice as much. Given the rise in popularity of low-cost index tracker funds and an eight-year rally in stocks, hedge funds are struggling to justify their high fee structures to investors.

Bitcoin Is Boosting Hedge Fund Returns

The start of the year, however, was not gloomy for all hedge fund managers. The funds that did outperform were those focusing on technology and currencies.

FX funds that had the foresight to gain exposure to digital currencies such as bitcoin managed to outperform their peers as well as the S&P 500 Index. The HFRI Macro: Currency Index, for example, gained 8.2 percent year-to-date.

This should not come as a surprise given the impressive rallies of digital currencies such as bitcoin and ether, which both reached numerous new all-time highs in the spring months of 2017 and generated a 190 percent and 4,900 percent return respectively since the start of the year.

Most Portfolio Managers Still Avoid Cryptocurrency

Despite the exuberant returns of leading digital currencies such as bitcoin, ether and litecoin in the past six months, the majority of hedge fund portfolio managers are still staying clear of digital currencies as an asset class.

The reluctance to invest in digital currencies ranges from a lack of in-depth knowledge about the asset class to concerns of liquidity and fears of cyber theft.

Louis Gargour, Wall Street veteran and founder of hedge fund LNG Capital, suggests that bitcoin is not ready yet for widespread adoption as an institutional asset class.

He told CNBC: “Bitcoin’s extreme volatility doesn’t sit well with managers working on a risk-adjusted return basis. Furthermore, there are valid concerns that digital currency assets can be hacked or stolen. Finally, there’s a perception that bitcoin remains a niche, retail investment that does not yet demonstrate sufficient quality to be seriously considered for many reputable institutions.”

On the other hand, Bobby Cho, trader at Cumberland Mining, a subsidiary of DRW Trading, told Bitcoin Magazine: “The digital currency investment landscape is changing rapidly along with the mindset of investors. A few years ago, bitcoin wasn’t viewed as a viable asset class through the eyes of hedge funds.”

However, this has started to change according to Cho. “Today, Cumberland Mining works with both traditional and digital-only funds by providing institutional-sized liquidity in different digital currencies, most notably bitcoin and ethereum.”

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Bitcoin Startup Expands U.S.-Mexico Remittance Corridor With New Partners

Bitcoin Startup Expands U.S.-Mexico Remittance Corridor

Denver-based bitcoin remittance startup bridge21 announced that it has added 38 new banks to its partner bank roster to enable more U.S.-based individuals to make international money transfers from the U.S. to Mexico.

bridge21’s new banking partners include Bank of America, Citibank, Chase, Fidelity, SunTrust Bank, TD Bank and Wells Fargo, among others. The new additions increased the startup’s partner bank network to 58 banks and credit unions in the U.S.

To provide its low-cost cross-border payment service, bridge21 leverages bitcoin to process the money transfers, while its customers deal purely in fiat currency. That means that users will decide on the amount of U.S. dollars they want to send to Mexico or the amount of Mexican pesos they want their recipients to receive. Once the user has agreed to the conversion rate and has initiated the transfer on bridge21’s platform, the startup then buys bitcoin in the U.S. with dollars and sells them for pesos in Mexico.

Also, as bridge21 uses bitcoin instead of the banking network to conduct its cross-border payments, it can do so at a much lower cost which results in better exchange rates for its customers and a 1 percent fee per money transfer. According to the startup, bridge21 manages to provide savings of over 5 percent compared to their competition.

“Last week we consistently offered 14 percent better than mid-market rates for large amounts,” said Will Madden, bridge21’s founder and CEO, in statement on June 1, 2017.

Since the launch of its U.S. to Mexico money transfer service, bridge21 has integrated BitGo Instant to increase the turnaround time of its transactions.

The “Trump Boost” for U.S.-Mexico Remittances

In light of President Trump’s plans to build a border wall between the U.S. and Mexico and his suggestion to fund the wall by heavily taxing or fully prohibiting U.S.-to-Mexico cross-border payments to keep the necessary funds in the country, money transfer operations have witnessed a sharp increase in U.S. to Mexico remittances.

A record number of money transfers have been conducted from the U.S. to Mexico between late 2016 and early 2017 in anticipation of potential policy changes by the Trump Administration that could restrict the flow of money across the border. As U.S.-based Mexican migrant workers send around $26 billion a year back home to their families, it is an important source of income for the Mexican economy.

The recent surge in U.S.-to-Mexico remittances, combined with an increasing demand for low-cost money transfer options, should bode well for bridge21 and other bitcoin remittance startups that are looking to service this economically important remittance pathway.

On the Horizon for bridge21

Madden told Bitcoin Magazine that the next step for bridge21 will be in remittances from Mexico to the U.S “going in the other direction, assuming we can tackle some regulatory challenges. Customers are demanding it and the total addressable market is enormous, nearly $300 billion annually. Also, when our Bridge Rate is bad in one direction it is good in the other. This means we can take full advantage of our Mexico rail without much work.”

Outside of Mexico, Madden is eyeing remittances between the United Kingdom and the U.S in both directions. “The U.K. Department for International Trade has opened a lot of doors for us and helped us to make the inroads necessary to expand there quickly and efficiently. We feel that the U.K. is very accommodating to financial technology companies. There’s a huge opportunity to connect the U.S. and U.K. banking systems with bitcoin.”

Aside from Mexico and the U.K., bridge21 is also planning to target large remittance markets in Asia and wants to expand into Europe and South America.

“Also on the list in no particular order are the Philippines, India, the EU and more countries throughout the Americas. China is a massive opportunity, but we’re not jumping in head first. We piloted there earlier in the year but backed out. There is too much regulatory uncertainty and the market is saturated. Japan is on our watch list,” Madden added.

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Job Hunting? Blockchain-Related Postings on LinkedIn Have Tripled

Job hunting? Blockchain on linkedin is up

The number of job posting for blockchain talent has increased more than threefold on LinkedIn in the last 12 months, signaling the high demand by commercial industries to develop distributed ledger technology–based solutions.

The demand for blockchain developers reportedly greatly exceeds the supply as corporations are struggling to find experts in the field who are not already employed by the hundreds of blockchain startups that have emerged in recent years.

According to data collated by the Financial Times, there are over 1,000 blockchain jobs listed on LinkedIn, and the number of blockchain-related ads has been growing at over 40 percent per quarter.

Currently, there are around 10,000 users on LinkedIn who list “blockchain” as one of their skills, while over 37,000 results appear when searching for the keyword “blockchain” using LinkedIn’s “people search” function. However, these users are composed not only of the highly sought-after blockchain developers but also of CEOs, CFOs, academics, advisors, consultants and journalists, among others.

Given the high demand for blockchain developers, it is not surprising that salaries are exceeding standard market rates for developers. Today, a blockchain developer can easily make a salary north of $130,000 per year, while top blockchain developers can earn up to $650,000, according to a report by the Financial News.

The average total remuneration for senior traders and mergers & acquisitions bankers in London are £281,000 ($360,000) and £326,000 ($420,000) respectively according to data collated by City A.M. That places top blockchain developers among the best-paid professionals in the financial services industry.

Josh Graff, U.K. country manager at LinkedIn, told Bitcoin Magazine: “We’ve seen the number of blockchain-related jobs posted on LinkedIn more than triple over the last year. There are nearly 10,000 blockchain professionals on LinkedIn, out of our 500m members, so it’s a niche field, but one with strong potential.”

He added, “Professionals in related areas such as cryptography and machine learning may want to look at the roles available and the skills they need to develop, as there is certainly a growing demand within the technology, finance and insurance industries for blockchain expertise.”

According to LinkedIn data, currently four out of five blockchain jobs have been successfully filled within the quarter for the past year; however, that also means that companies are still not able to fill 20 percent of their blockchain talent demands.

The recent surge in blockchain-related job listings is a testament to the high hopes that financial institutions have for blockchain technology. For the future cost reductions and increases in efficiency that blockchain technology promises, financial services companies are willing to dig deep into their pockets to source the right talent that can make that happen for them.

If blockchain technology becomes as impactful on the financial industry as predicted, it will not be the traders and M&A bankers but the blockchain developers who will become the new “masters of the universe.”

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Norwegian Bank Grants Access to Bitcoin Investments Through Online Banking

Norwegian Bank Grants Access to Bitcoin Investments Through Online Banking

Norwegian online bank Skandiabanken now recognizes bitcoin as a new investment class and allows its customers to access their bitcoin holdings through its online banking platform, according to a Norwegian media report.

Through an integration of the Coinbase wallet, which enables the buying and storing of cryptocurrency holdings in bitcoin, ether and litecoin, the bank’s customers now have direct access to these holdings using Skandiabanken’s online banking.

Christoffer Hernæs, head of innovation and development at Skandiabanken, said that Skandiabanken “recognize[s] cryptocurrency as an investment class” and that it has “an equal footing with other securities.”

Skandiabanken is, therefore, one of the first financial institutions to publicly acknowledge bitcoin as an alternative investment asset class at a time when the vast majority of its competitors are shunning the cryptocurrency that many believe poses a threat to the current banking business model.

Hernæs also points out that Japan has recently moved to officially recognize bitcoin as a legal payment method, and that bitcoin’s average daily volatility has decreased from 10 percent to 4 percent last year.

Bitcoin’s decrease in volatility and the sharp increase in price over the last 12 months have led to a wave of new bitcoin users around the world. In Norway, more and more individuals are now also turning their eyes toward digital currencies, Hernæs stated.

Not all banks in Norway share Skandiabanken’s enthusiasm for offering its users access to bitcoin as a new investment class. Norway’s largest bank, DNB, closed the bank account of Norges Bitcoinforening, Norway’s Bitcoin association, in September 2016, citing concerns that the association’s funds may have a connection with money laundering and terrorist financing.

Hernæs acknowledges DNB’s concern in regard to the country’s strict anti-money laundering regulations that require a stringent assessment of each banking client. However, he also said, “We recognize that this is something people want to put their money in. When we think it is right to look at new solutions we can offer, we think it is a better approach than categorically thinking that this is scary.”

The head of Norway’s Bitcoin association, Stephan Nilsson, is pleased about Skandiabanken’s new Bitcoin service: “This is very positive. These are the signals we have been waiting for from the Norwegian banking industry.”

Skandiabanken joins the ranks of the very few banks in Europe that are embracing Bitcoin. Only Germany-based Fidor Bank and Georgia-based Liberty Bank offer similar services to its customers. Fidor Bank allows German customers to buy and sell bitcoin directly through a collaboration with bitcoin.de, and Liberty Bank allows its customers to buy bitcoin through its ATM network in Georgia.

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Irish Banks to Test New Blockchain-Based Interbank Payment System

Irish

Irish lenders Allied Irish Banks, Ulster Bank and Permanent TSB have teamed up with global consultancy Deloitte to work on a pilot program that will leverage blockchain technology to increase the speed and security for the country’s domestic interbank payments.

The collaborative project carries the name Project GreenPay and will use technology developed by Ulster Bank’s parent company, Royal Bank of Scotland (RBS).

The payments platform being trialed is called Emerald. RBS’s Emerald platform, which was built on top of the Ethereum blockchain, has already been tested in the Dublin-based startup hub Dogpatch Labs, where participating banks have been conducting dummy payments among themselves to test the blockchain-based system for performance, stability and accuracy. The platform is able to acknowledge payments in less than 10 seconds while processing large transaction volumes.

The distributed ledger technology pioneered by Bitcoin allows transactions to be recorded and shared with permissioned members on a distributed ledger, enabling payments to be processed in a more secure and efficient manner.

“[The blockchain is] essentially a software that provides a way of recording transactions in a trustworthy way. It has the potential to disrupt multiple industries for the benefit of customers, and we’re determined to investigate how we can harness this for the financial sector,” said Ulster Bank’s chief administrative officer, Ciarán Coyle.  

“When we saw that RBS had that capability, we decided to use the platform in the Republic. We looked at how we could prove it at an industry level and looked at doing collaboration at an industry level,” he added.

For RBS’s Head of Innovation Engineering Richard Crook, it “made sense” for RBS’s Irish subsidiary, Ulster Bank, to adopt its Emerald payment system for the collaborative industry-wide payment network trial. “We’re delighted to support that and further prove that blockchain [technology] can be used to better serve customers,” Crook added.

David Dalton, consulting partner and financial services industry leader at Deloitte Ireland, stated that the pilot project would leverage the company’s blockchain lab in Dublin, and added: “We believe blockchain adoption will happen more quickly than anticipated and without a proactive and well-adopted strategy, banks and insurers risk being locked out of potential innovations enabled by this technology.”

No specific timeframe has been set for when the new payment system could be implemented in the Irish financial system, and there is no guarantee that it will. However, Project GreenPay is another clear signal that banks across the world are embracing blockchain technology to improve the efficiency and security of their services. It will not be long until the blockchain will become an integral part of the global financial system.

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Palestine May Launch Its Own Cryptocurrency as Sovereign Legal Tender

Palestine Plans Cryptocurrency as Sovereign Legal Tender

Palestinian officials are planning for the region of Palestine to receive its own digital currency within the next five years. The motivation for this stems from concerns about potential Israeli interference, Azzam Shawwa, Governor of the Palestinian Monetary Authority (PMA), told the news agency Reuters.

Palestinians have no sovereign currency of their own and use a combination of different currencies, including the euro, the dollar, the Jordanian dinar and the Israeli shekel, to conduct their daily financial transactions.

Due to the lack of a sovereign currency, Palestinian officials have little control over money supply and inflation. This is why the Palestinian Monetary Authority wants to introduce a bitcoin-like digital currency as the territory’s new legal tender, which will be called “the Palestinian Pound,” according to Shawwa.

It is the Palestinian Monetary Authority’s goal to become a fully-fledged and internationally recognized central bank for an independent Palestine. However, it is still unclear how a digital sovereign currency for Palestinians would sit with the 1994 Paris Protocol agreement. The protocol agreement gives the Palestinian Monetary Authority the functions of a central bank; however, it has not granted the institutions the right to issue its own currency. The Paris protocol recommends the use of the shekel in the region and, thereby, effectively provides Israel with a veto over the establishment of a Palestinian currency.

A sovereign digital currency, though, would make sense for Palestine. Not only would it allow the PMA to have more control over the country’s money supply and inflation, but it would also circumvent the practical challenges of delivering hard currency into the country as the PMA has no money-printing facilities.

“If we print currency, to get it into the country you would always need clearance from the Israelis and that could be an obstacle. So that is why we don’t want to go into it,” Shawwa explained to Reuters.  

While the digital Palestinian pound is planned to be issued within the next five years, this will be no easy task for Palestinian authorities, given that the Palestinian Monetary Authority has been trying for over a decade to become an internationally recognized central bank.

Another option for the Palestinian monetary situation would be to keep the current status quo of the four above-mentioned currencies in use or to officially recognize one of the these currencies as the territory’s legal tender. However, a digital sovereign currency would be the preferred choice for Palestine, according to Shawwa.

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Japan to Receive Its First Interest-Paying Bitcoin Deposit Accounts

Japan to Receive First Interest-Paying Bitcoin Deposit Accounts Through Coincheck

A little over a month after Japan declared the digital currency bitcoin (BTC) to be an officially recognized legal payment method, the Japanese bitcoin exchange Coincheck has announced the first interest-paying bitcoin deposit accounts for the Japanese market.

According to a report by the Nikkei Asian Review, the Tokyo-based digital currency exchange will start offering bitcoin fixed-term deposit accounts to its users. Coincheck Lending offers four possible plans, each with a different timeframe and interest rate.

Users will be able to deposit bitcoins for a period of 14 days to receive a 1 percent annual interest rate, a period of 30 days will generate 2 percent annual interest, 90 days will make users 3 percent, and for a one-year bitcoin deposit users will receive 5 percent interest.

That means that a user who, for example, wants to hold 10 BTC as a long-term investment and receive interest on his holdings can generate an interest income of 0.5 BTC, which equates to around $885 at today’s bitcoin exchange rate. All interest payments on the deposits are received at the end of the deposit term.

According to the Coincheck Lending page, bitcoin is currently the only deposit currency on offer, but other digital currencies such as Ethereum, Ripple, Monero, Factrom and Augur will be available to deposit “in the near future.” All verified Coincheck users are able to use the new lending service provided they agree with the company’s loan consumption agreement.

Bitcoin Has Been Paying Interest for a While

While Coincheck is the first bitcoin startup to introduce bitcoin deposits in Japan, it is not the first company to provide this service. The old argument of bitcoin opponents that bitcoin is inferior to fiat currency as it does not pay interest has long been untrue.

Several bitcoin exchanges, including Bitfinex and Poloniex, offer users the possibility to lend bitcoin to margin traders in return for daily interest payments. Furthermore, U.K.-based bitcoin savings account providers BSave and Magnr also pay interest on bitcoin deposits.

Risk/Return on Bitcoin Deposits

The idea of earning a fixed interest on bitcoin holdings may sound appealing to investors, especially those who consider themselves long-term holders. However, a fixed-term bitcoin deposit is not the same as a fixed-term deposit in fiat currency, as the former comes with no regulatory protection should the company with which users deposit their funds goes bankrupt. Coincheck actually highlights this fact on their lending page, stating that “users have a risk [of] not being able to receive deposited cryptocurrencies in a case [where] Coincheck [goes] bankrupt.”

Japan’s Financial Services Agency stated that Coincheck’s deposit service is exempt from the country’s banking regulations as bitcoin is not legal tender. However, should bitcoin become a mainstream payment method in Japan, services such as Coincheck’s bitcoin deposit accounts could receive their own regulatory requirements.

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