Over One Third of Startups in Second Cohort of FCA’s Fintech Sandbox Are Building Blockchain Solutions

The UK’s financial regulator, the Financial Conduct Authority (FCA), has announced the second cohort of its fintech sandbox on June 15. Out of the 24 startups joining this year’s cohort, nine are developing solutions using blockchain technology, which is a testament to the potential that the FCA sees for this new technology to play a major role in the financial services sector of the future.

The FCA’s fintech sandbox allows startups to trial new financial products and services without “incurring the normal regulatory consequences.” The idea behind the fintech sandbox is to boost technological innovation as well as competition in the UK’s financial industry.

The FCA’s Executive Director of Strategy and Competition, Christopher Woolard, stated that the fintech sandbox is growing in popularity as more firms applied for this year’s cohort than for the one in the previous year.

“It is particularly encouraging that both the number of firms applying and accepted for testing has increased in cohort two. That means more innovative firms, trialing more innovative propositions to bring to the market. This is an important part of the FCA’s commitment to promoting innovation and competition in the markets we regulate,” Woolard stated.

77 submissions were received for this year’s cohort of which 31 applicants met the eligibility requirements. Out of the 31 eligible fintech startups, the 24 chosen ones were accepted into the fintech sandbox as they are ready for testing. Now that the second cohort has been finalized, the startups will start testing their new products and services shortly on a small-scale and short-term basis to safeguard consumers while still having enough leeway for innovation to thrive.

The selection of startups is very diverse. The sectors covered by the participating fintech startups include insurance, payments, retail banking, and lending, among others, while new technologies involved include artificial

IBM: A Blockchain Hero of Sorts

Almost 3,000 C-suite leaders in executive positions were surveyed by IBM for their input regarding the topic of the blockchain, in the most comprehensive report on business sentiment regarding the technology. They were given a chance to discuss operational plans, revenue projections, and overall industry shifts.

According to the results, one third of these C-Suite executives are currently using or are considering the integration of blockchain technology in their business. Of those who are considering blockchain, 80 percent of these leaders are already allocating investments towards their exploration of the new technology or they are investing in reply to the industry changes that are a result of the new trend.

The study, which took place via IBM’s Institute for Business Value, included input from leaders from a variety of businesses, spanning the globe. The study compares those who are and those are not on board the blockchain bandwagon.

Brigid McDermott, Vice President of IBM’s Blockchain Business Development explained:

“With blockchain, everyone is looking at the same thing at the same time. These new trusted transactions will spawn new business models, processes and platforms where all ecosystem participants can be connected to create new value.”

McDermott further explained, “Consortia, regulators, and innovators will help create new standards across industries and geographies. Early adopters need to move fast to help shape how these platforms evolve.”

The surveyed C-Suite executives revealed that more than half of the participants in the study admit to feeling unprepared to build blockchain platforms at this time, even though they overwhelmingly agree on the need to implement blockchain into their business models. Even more eye opening; out of the studies blockchain explorers (the participants who are thinking of or are learning about blockchain technology) 100 percent of them expect their businesses to integrate or use

Funderbeam Report Shows Blockchain Funding Is Growing

Estonia-based “stock exchange for startups” Funderbeam released its Blockchain Report 2017, which includes details on blockchain startup funding such as total funding and individual funding rounds since 2012 as well as industry funding by region, industry co-relations, top investors, and the most funded startups.

Funderbeam, the world’s first primary and secondary marketplace for early-stage startup investments, uses the blockchain to secure all interactions sourced through it. To add to this unique value proposition, Funderbeam also provides free access to data covering over 180,000 startups and investors and publishes regular reports on startup funding trends.

Funderbeam’s internal data, as well as data from other sources, was used to compile the Blockchain Industry Report 2017. Social media profiles, such as Facebook, Twitter, and LinkedIn, of companies and investors, were used to source data as well as their web pages. Media outlets like TechCrunch, FinSMEs, and PE HUB also provided information that went into the report. In addition to the sources, Funderbeam partnered with CrunchBase and other regional partners across Europe.

According to the report, the blockchain industry began gaining traction in 2013. The industry has since then grown from funding of about $75 million with funding now totaling to $856 million. Although the total number of funding rounds have decreased, the funding has grown signaling a rise in funding amounts per round.

Regionally, North America was determined to be the leader in terms of funds raised. It also received the largest amount of startup funding though only 0.32 percent of the total funding in the region went to blockchain startups.

Europe had a funding peak in 2014 but saw a significant dip the following year. However, it is the region where the largest share of funds (about 1.25 percent) go to blockchain startups. In absolute terms, the United Kingdom leads Europe in

South Korea’s Hurdles In The Race Toward Blockchain Innovation

FinTech progress has come to a halt in South Korea as regulators carefully try to piece together new technology with existing privacy laws. In October 2016, Financial Services Commission (FSC) Chairman Yim Jong-Yong revealed South Korea’s plans for the acceptance and regulation of bitcoin. He announced in a public speech, “The government will push for the systemization of digital currency on a full scale in tandem with a global trend in the U.S., Japan, and other countries.” At the time, the top three Bitcoin exchanges in the country processed around $1.3 billion between January 2015 and October 2016, according to data from the FSC.

In December of 2016, the Korea Financial Investment Association launched its first blockchain consortium consisting of 21 financial investment companies and five blockchain tech firms to function as a leading blockchain think tank in the local capital market. Then, in January 2017, South Korea’s financial authorities revealed their plan to launch a full-scale pilot project for blockchain-powered financial services. The plan involved implementing blockchain technology as the core infrastructure for a sweeping financial services platform.

Progress continued in April 2017. Hongik University in Seoul and the Bank of Korea (BOK) released a research paper entitled, “Crowding out in a Dual Currency Regime? Digital versus Fiat Currency” which describes how cryptocurrencies and fiat monetary systems can exist side-by-side in the future in what is referred to in the paper as a “dual currency regime.” This research paper shows great interest from the BOK and Korea’s financial authorities in pursuing cryptocurrencies and blockchain tech in an effort to overhaul the traditional, less efficient methods of financial transaction. Also in April 2017, Seoul-based South Korean life insurance company, Kyobo Life Insurance, was officially selected by the government to trial the first real world implementation of blockchain technology for commercial

British Computer Scientists Aim to Automate Financial Regulation with Smart Contracts

Professor Philip Treleaven and his renowned financial computer science team at University College London are working on a new project that involves automating financial regulation through the application of blockchain-based smart contract technology.

Treleaven and his team are assembling several technology-related components to create what Treleaven has coined core “regtech,” which enables the automation of financial regulation processes such as filing for FCA approval for a banking license.

The new solution is composed of five parts:

An artificially intelligent regulatory advisor as the front end to the FCA’s regulatory handbook. Fully automated real-time monitoring of digital and social media to identify potential consumer and market abuse. Fully automated reporting using digital compliance communication as well as big data analytics. Regulatory policy modeling using smart contracts to codify regulations and to assess impact before deploying new regulation. Fully automated regulation through applying distributed ledger technology to automate regulatory monitoring and compliance. Automating the FCA Registration Process

One of the first use cases Professor Treleaven and his team are targeting is the FCA registration process for companies that require regulatory approval to conduct financial services-related business in the UK.

The current process to receive FCA authorized status is lengthy, costly and involves a lot of engagement between FCA staff and applicant firms. This is made worse by the fact that the FCA now deals with almost twice as many financial services firms than previously, while still having roughly the same amount of staff as before. That is one of the reasons why automating regulatory approval process would be a create cost-saver and make the entire process more efficient and quicker.

“So we are trying to build a front end to the FCA Handbook that basically will interact with the registrant and try and fill in the forms for them; and

A Cost-Benefit Analysis of Using Smart Contracts in Banking

Smart contracts are one of the most talked about new technologies in financial services today. Blockchain-based smart contracts can be used for two or more parties to electronically agree on terms and conditions of a contract involved in a financial transaction. In the case of banking and financial services, the applicability of smart contracts is very broad and ranges from issuing bonds to improving KYC processes as well as settling and clearing securities, among others.

The whitepaper published by the UK FinTech Network in cooperation with technology consulting company Zerado titled ‘Smart Contracts – From Ethereum to Potential Banking Use Cases’ discusses the potential use cases of smart contracts in banking as well as weighing both the costs and benefits of implementing this new technology in the financial industry.

The original definition of smart contracts dates back to 1994 when computer scientist Nick Szabo defined them as “a computerized transaction protocol that executes the terms of a contract. The general objectives are to satisfy common contractual conditions (such as payment terms, liens, confidentiality, and even enforcement), minimize exceptions both malicious and accidental, and minimize the need for trusted intermediaries. Related economic goals include lowering fraud loss, arbitrations and enforcement costs, and other transaction costs.” Despite this definition being over 20 years old, it hasn’t changed much since. The only difference is that through blockchain technology, smart contracts are now a reality.

A distributed ledger-based smart contract allows all parties in a transaction to agree to the terms and conditions of the transaction, including automated payments when certain conditions are met. The terms of the contract are written in a programming code and then the code is then used to define the rules and legal consequences in the same way a traditional legal document would. This includes obligations, benefits and legal