U.S. Developments

Mastercard and Food Co-Op Work Together on Food Visibility Blockchain Solution

Envisible, a company that is dedicated to supply-chain visibility in food systems, has teamed up with Mastercard’s blockchain-based Provenance Solution to offer a food tracking system. The system is called Wholechain and will allow customers to know more about the source of the food they consume and its journey to their table.

Topco Associates, one of the largest group purchasing organizations in the U.S., is a notable early adopter of the system. Topco’s food co-op includes almost 50 member-owners – including supermarkets, wholesale distributors, and pharmacy companies – that collectively bring in about $170 billion in sales annually.

Topco has begun working with its member grocery chains, starting with Food City, to pilot the use of the technology. The first of several species to be tracked will be salmon, cod, and shrimp.

Read more about the launch here.

Paxos Trust Company Receives No-Action Letter from the SEC

On October 28, 2019 the U.S. Securities and Exchange Commission’s (SEC) Division of Trading and Markets issued a no-action letter issued to Paxos Trust Company in which it agreed that it would not recommend an enforcement action against the company for failing to register as a clearing agency during the 24-month “feasibility study phase” of its blockchain-settlement service.

Paxos, a DTC participant, says its settlement service “will allow two parties to bilaterally settle securities trades directly with each other.” The service is designed to offer simultaneous exchange of cash and securities to settle trades. Credit Suisse and Société Générale will be the first two companies to utilize the service, which will operate on a private and permissioned network.

The no-action letter is not without limitations: no more than seven participants will be eligible to use the service and they must satisfy a particular criterion; the only securities eligible for settlement are those publicly traded and properly registered; and Paxos must provide the SEC with prior and same-day notification of certain events, as well as quarterly and ad hoc reporting. The service must comply with trade volume restrictions and other restrictions on eligible securities.

Read the no-action letter here.

Bakkt to Launch Consumer Crypto App in the First Half of 2020

Bakkt, a bitcoin futures exchange and digital assets platform founded in 2018 by the Intercontinental Exchange, announced that it plans to launch a consumer-facing app to help retail customers transact with cryptocurrencies. The company said in a blog post that the app will go live sometime in the first half of 2020 and that Starbucks will be the first launch partner.

Canaan Creative and Bitmain Seek U.S. IPOs

Canaan Creative, “one of the world’s largest mining equipment manufacturers,” formally filed an attempt to go public. In its registration statement, Canaan Creative said that it intends to list on NASDAQ under the ticker name CAN and sets a placeholder amount of $400 million for the raise. Canaan Creative previously attempted to go public in mainland China and Hong Kong, but both attempts were unsuccessful.

Bitmain, Canaan Creative’s competitor and another large mining manufacturer, is said to have filed a confidential IPO with the SEC. Bitmain’s IPO is said to be backed by Deutsche Bank and comes after Bitmain recently made a sizable investment in a mining plant in Rockdale, Texas.

Read Canaan Creative’s Form F-1 Registration Statement here.

Read more about Bitmain’s filing here.

SEC and CFTC Bring Parallel Actions Against First Global Credit 

The SEC and the Commodity Futures Trading Commission (CFTC) issued parallel actions against XBT Corp. SARL d/b/a First Global Credit (FGC), a Switzerland-based securities dealer.

The SEC brought charges against FGC for “offering and selling unregistered security-based swaps to U.S. investors using bitcoins and for failing to transact its swaps on a registered national exchange.” According to the SEC, FGC offered “bitcoin Asset Linked Notes,” where investors could participate in the price movements of securities, including those listed on U.S. securities exchanges, without owning them. The SEC’s order also finds that FGC “transacted with investors who did not meet the discretionary investment thresholds required by the federal securities laws and failed to properly register as a security-based swaps dealer.”

FGC, although neither admitting nor denying the findings in the Commission’s order, consented to a cease-and-desist order and agreed to pay disgorgement of $31,687 and a penalty of $100,000.

The CFTC also announced a settlement with FGC arising out of similar conduct. The CFTC found that FGC acted as a futures commission merchant (FCM) “by soliciting or accepting orders for futures from U.S. customers and by accepting bitcoin to margin their trades without being registered with the Commission.” According to the CFTC, FGC established a separate page on its website to assist customers by instructing them how to “Trade Futures Using bitcoin as collateral margin.” For its failure to register with the CFTC as a FCM, FGC was ordered and agreed to pay a $100,000 civil monetary penalty, to disgorge gains received in connection with its violations, and to cease and desist from future violations of the Commodity Exchange Act.

Read the SEC press release here.

Read the CFTC press release here.

International Developments

China’s Central Bank to Certify Software Used for Digital Payment and Blockchain

China’s central bank, the People’s Bank of China announced that it will certify 11 types of fintech hardware and software. The hardware and software to be certified are commonly used for digital payment and blockchain services. To certify the products, the Bank is launching a new verification system called the “Certification of Fintech Products.”

This announcement comes on the heels of the head of the Bank calling for commercial banks in China to adopt blockchain technology in digital finance and President Xi’s statement that China should “seize the opportunities” afforded with blockchain technology.

The 11 fintech products set for certification will cover “all the products that could be involved in digital payment technologies, including point-of-sale mobile terminals, embedded application software, user front-end software, and security carriers and chips.”

The Bank will grant the 11 applicants a Certification of Fintech Product (CFP) if their products pass the prototype examination and on-site checks. The certificate will be reviewed and renewed every three years.

Read more about the certification program here.

Canadian Investment Fund to List Bitcoin Fund on Major Stock Exchange

3iQ, a Canadian investment fund manager, received initial panel approval of the Ontario Securities Commission (OSC) to launch a closed-end bitcoin fund on either the Toronto Stock Exchange or the TSX Venture Exchange later this year.

The company announced that the OSC has directed the OSC Director to issue a receipt for a final prospectus of the fund. In its press release, 3iQ said that they have “addressed the questions of pricing, custody, audit, and public interest issues in a regulated investment fund” and that they “intend to refile the prospectus as soon as possible.”  The fund will use a bitcoin benchmark developed by VanEck’s MV Index Solutions. 3iQ already operates a daily mutual fund that offers accredited investors exposure to Bitcoin, Ether, and Litecoin.

Gemini Trust Company LLC, a New York-based cryptocurrency exchange and trust company, will act as custodian of the bitcoin in the Fund.

Read the company’s press release here.

Korean Government Continues Investment in Blockchain Startups

For the third year in a row, the Korea Internet Security Agency (KISA) announced that it will support blockchain-related projects in 2020. Ten projects will be chosen for up to a $1.2 million investment. Public sector and private sector projects are eligible to apply between November 11- December 20, 2019. The projects awarded last year included a donation platform, Hyundai AutoEver’s used car service platform, and the initial blockchain ID platform–which was supported by all the major phone companies in the country.

Read more about the announcement here.

Inter-American Development Bank is Testing Blockchain for Land Registries

The Inter-American Development Bank (IADB) announced that over the next two years, they will test putting land registration and lending on a blockchain in Bolivia, Peru, and Paraguay.

Usually, registering land involves the bank collecting the legal information and technical information about properties to create a proper record of land ownership where land was sold informally.

The IADB, which is the largest source of development financing for Latin America and the Caribbean, hopes that blockchain will make the process to reestablish proper land titles in Latin America countries, which can cost $50 million to $100 million per project, more efficient.

The organization is working with blockchain startup ChromaWay and Bolivian IT services company Jalasoft to pilot the technology

Read more about the pilot here.