Bitwala Partners With Visa-Backed Solaris on Blockchain Bank Account

Blockchain startup Bitwala is aiming to launch Germany’s first “blockchain bank account” – and it’s struck a strategic partnership with Berlin-based …

Blockchain startup Bitwala is aiming to launch Germany’s first “blockchain bank account” – and it’s struck a strategic partnership with Berlin-based fintech company solarisBank in order to pull it off.

Built as part of solarisBank’s “Blockchain Factory” initiative, the partnership will enable Bitwala to offer banking services by way of solarisBank’s German banking license, spokesperson Roman Kessler told CoinDesk.

The goal is to launch the service in mid-November, and Bitwala hopes to cater to those who already hold cryptocurrencies. Bitwala raised €4 million in new funding last month to support its efforts.

Thus far, according to the company, 35,000 users have pre-registered for the upcoming service.

Speaking to CoinDesk, Kessler stressed that “we are a blockchain banking service” and not a bank. That said, Bitwala hopes to get there one day, and is planning to seek a German banking license of its own next year.

Bitwala’s partner has some notable backers, including Spain-based BBVA and card provider Visa. SolarisBank closed a €56.6 million Series B funding round earlier this year, according to TechCrunch, having been founded in 2016.

Kessler explained two aspects of solarisBank drew Bitwala to it: the “fantastic technical platform that allows” any company the ability to easily “go in and plug your use cases” into the solarisBank API, and the regulatory access vis-a-vis its banking license.

Indeed, solarisBank positioned itself as a possible partner for the crypto-industry through its Blockchain Factory effort.

And the solarisBank partnership helps Bitwala avoid some of the regulatory pitfalls it’s encountered in the past. In January, Bitwala was one of several cryptocurrency companies affected when Visa Europe closed the account of its debit card issuer.

“We are very proud to partner with solarisBank as we launch our new product. Their technical services and regulatory umbrella enable Bitwala to be fully compliant with German banking requirements while offering a reliable user experience,” Jörg von Minckwitz, president of Bitwala, said in a statement.

Bitcoins and euros image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Australia Wants Citizens With Disability to Settle Insurance on a Blockchain

An Australian federal science agency is working with one of the “Big Four” commercial banks in the country to test a blockchain application that aims to …

Australia’s federal science agency is working with one of the “Big Four” commercial banks in the country to test a blockchain application aimed to make it easier for citizens with disabilities to settle insurance payments.

Commonwealth Bank of Australia (CommBank) and the Commonwealth Scientific and Industrial Research Organization (CSIRO) said in an announcement on Tuesday that the two are testing the proof-of-concept as part of a blockchain project dubbed “Making Money Smart.”

The goal is to introduce a blockchain token coded with smart contracts to the country’s National Disability Insurance Scheme (NDIS) so that participants and service providers can execute payments based on pre-defined conditions, such as who can spend certain funds by what deadline.

CSIRO went on to explain that the reason for selecting participants and service providers in the NDIS to run the trial is because participants of the scheme need highly “personalized payment conditions.”

“In the NDIS, participants have individualized plans that can contain multiple budget categories – each with different spending rules. The prototype app supports participants to manage their plan by enabling them to find, book and pay for services from NDIS service providers without the need for paperwork or receipts,” the announcement explains.

Sophie Gilder, head of CommBank’s blockchain innovation lab, added that the distributed network can share information of NDIS participants across different parties and automate transactions, which gives the government a higher visibility of money flows and helps reduce the costs for service providers.

The partners will release a further report for the Making Money Smart project in November, which will detail the designs, benefits, and limitations of the test with suggestions for other future applications.

The joint effort is the latest blockchain exploration conducted by the two groups. As CoinDesk previously reported, CSIRO announced it had completed a global test of its own blockchain network that claimed to be able to process 30,000 cross-border transactions per second.

The news also follows a recent report that CommBank worked with the World Bank Group to raise $81 million for a bond issued via a blockchain network developed by the bank.

Sydney image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Canadian blockchain project urges banks to proceed with caution

Despite the real-world use cases being found around blockchain and distributed ledger technology, banks are being warned to be cautious about …

Despite the real-world use cases being found around blockchain and distributed ledger technology, banks are being warned to be cautious about committing to any such projects.

Canada’s Project Jasper, a research initiative focusing on blockchain and what role it might have in central bank transaction settlement, is advising banks to take a wide view of the pros and cons of distributed ledger technology and not just assume it can automatically improve systems that currently work fine.

Payments Canada, the Bank of Canada, the R3 blockchain consortium and major banks have worked on Project Jasper for more than a year, testing various aspects of the technology that was initially developed to manage and track bitcoin transactions through a ledger visible to all and maintained by a distributed system of miners.

Bank of Canada
Bloomberg News

“Looking at distributed ledgers in which only authorized entities can make payments or perform functions on the system, we found at a very high level that we didn’t really see that there was much promise in terms of net benefits (to a bank),” said Scott Hendry, senior special director overseeing financial technology research at Bank of Canada.

Even in just looking at the costs of operating a wholesale payments system, it is not clearly evident that the distributed ledger would be a benefit over a centralized system for inter-bank payments that are already in place, Hendry said last week during the annual Payments Symposium at the Chicago Federal Reserve Bank.

Those involved with the proof-of-concept Jasper Project and its various phases have concluded that a standalone blockchain wholesale payment system is unlikely to replicate the benefits of a centralized wholesale payment system, but it does have some potential in interacting with broader aspects of the financial market infrastructure.

One such example would be adding cash on the same ledger as payments involving exchange-traded assets, in order to settle the “cash leg” of each transaction.

“We are modernizing the payments system in Canada, but it is not being done because it is inefficient,” Hendry said of the country’s faster payments initiative. “It is being done because it is an old platform and we want to add functionality.”

Still, the key lesson learned from Project Jasper is that banks need to look at it more broadly than as just a core payments system to determine where the payoff might be for distributed ledger technology, Hendry added.

Project Jasper will continue to research the potential for blockchain in a cross-border payments setting.

“I applaud the Payments Canada folks for following through with Project Jasper,” said Peter Tapling, chief commercial officer at SpringLabs, a company building blockchain-based protocols for financial services and other industries.

“As an industry, we are never going to know how some of this stuff works unless somebody follows it through all the way to the end,” Tapling said.

A plus for blockchain is that it doesn’t present a major learning curve for banks in that it is not a technology entirely foreign to the industry.

“We clearly understand the cryptographic transforms that are being used in blockchain, so that’s good that we don’t have to re-learn that,” Tapling said. “But the new things are the value chain and the consensus model, and we do have to wrap our heads around that.”

Tapling said it is good for a bank’s technology team to have researched new innovation and has a clear focus on what problems it is trying to solve and has already formulated a technology it believes might work.

“In speaking to many of the banks (executives), it seems that on average it can cost $1 million just to get a project started because they need a project manager, a legal person and a security person (along with IT),” Tapling said. “It is hard work to dig into the research and see if a new technology works for them.”

Hendry acknowledged the process is vital, but that even Project Jasper is only testing what could be, or might be.

“We go into these phases with several hypotheses that we want to test,” Hendry said. “The unfortunate part is these are proofs of concept, rather than real production systems.”

In that regard, the researchers are “only getting an indication of what the answer would be as opposed to hard data,” he added. “The answers are qualitative, rather than quantitative.”

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Coinbase Seeks Patent for Security-Enhanced Bitcoin Payment System

Software giant IBM also has several under its belt, including one for “node characterization in blockchain,” which would allow a distributed ledger to …

U.S.-based digital currency exchange Coinbase has filed a patent on a new Bitcoin payment system designed to make cryptocurrency payments safer. The new platform will provide an added layer of security for users’ keys and allow them to make Bitcoin payments directly from their digital wallets.

A segment of the patent filing states, “It may be a security concern for users that the private keys of their Bitcoin addresses may be stolen from their wallets. Existing systems do not provide a solution for maintaining security over private keys while still allowing the users to checkout [sic] on a merchant page and making payments using their wallets.”

If approved, the system would work by allowing customers to encrypt their passphrases into a master key to create an additional buffer against theft. The master key encrypts customers’ private keys and whatever transactions are made. Once a transaction is complete, the master key is deleted, ensuring no outside party can gain access to the information. A new master key is created for each transaction.

Another novel element of the system is its “freeze logic,” which would allow administrators to suspend the system and prevent transactions from occurring in the event of a theft or cyberattack. The patent reads, “At any point in time after the master key is loaded, the system can be frozen. The system can be unfrozen after it has been frozen using keys from the key ceremony. The checkout process can be carried out when the system is frozen and when the system is unfrozen. The payment process can only be carried out when the system is unfrozen and not when the system is frozen.”

Lastly, the application proposes API integration capabilities, which would enable various websites to run versions of the payment system. The API uses a specific pair of keys – one of which is stored on the corresponding website, the other on Coinbase – that must match for a transaction to be approved and completed.

This is not the first time Coinbase has filed for such a patent. The company had tried for something similar nine times in 2015 alone, leading critics to accuse the exchange of trying to build a monopoly on bitcoin services. CEO Brian Armstrong denied this, saying that the company’s goal was to keep blockchain technology away from “patent trolls.”

“One of the best ways to defend against patent trolls is to build your own portfolio of patents, and this is exactly what we are doing, along with just about every other tech company out there,” he wrote in a blog post. “It is an unfortunate game we all must play, but we didn’t invent the rules.”

The company also filed a patent in 2016 to potentially secure Bitcoin-based private keys.

In addition to Coinbase, several traditional financial institutions have filed for blockchain-based patents. Bank of America filed approximately 50 live patents in the blockchain space, more than any other venture. Software giant IBM also has several under its belt, including one for “node characterization in blockchain,” which would allow a distributed ledger to house a series of nodes characterized by specific functions.

Last year in June, delivery company UPS also filed a blockchain patent for what it calls the “autonomous services selection system and distributed transportation database.” Whenever something is delivered from one point to another, it must go through multiple networks and segments before it reaches its destination. This makes it difficult for logistics services to coordinate with one another. The patented system would generate sets of transportation data that is then stored securely on a blockchain and easily tracked to ensure logistics companies meet handling requirements appropriately.

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Weekly Roundup, August 17: Wild Ride

An article in Forbes discovered his secret desire to “walk into a convenience store, get a card and start paying a small fee to start using Bitcoin Cash.

If you like roller coasters, you’ll love cryptocurrency. On this week’s ride, guests were treated to the whole gamut of thrill factors: terrifying plunges, nauseating lows, and vertical ascents.

We’ve tried to keep our minds off the markets with thoughtful coverage, like the SEC’s evolving position on cryptocurrencies or the new Coinbase wallet. We’ve even paged through the archives to look back on last year’s headlines.

But it’s hard to cover every story, especially when your finances are going through a zero-gravity plunge followed by a high-G loop-the-loop and a sudden and unexpected brake. Don’t worry, that’s just part of the ride….we think.

While we wait to catch our breaths, here are some of the other stories you may have missed:


Volatile Fiat Declines

First Venezuela and Iran, now Turkey. Annualized inflation on the Lira is now over 100%, and the Turkish currency lost 7% of its value in a single day.

Via TradingEconomics

Experts blame the currency crisis on four years of debt-fueled economic expansion, causing prices to rise. President Erdogan, who has previously used short-term policies to appease voters, attributed the crisis to a sparking trade war with the United States.

Economists predict that the crisis may spread to the country’s trading partners, which may mean further crises down the road in Europe and Asia. Citizens of those countries might soon find themselves desperately in need of a sound, government-proof international store of value, but we can’t imagine how that would work. Perhaps Paul Krugman has some ideas.


Vitalik Fuels Debate

If you measure your age in double digits, you’ve probably avoided the catfight between the two Bitcoins. But sometimes it’s hard not to look—like when a careless reporter forces the argument into public view.

Vitalik Buterin, the Patron Saint of Ethereum, recently outed himself as a Bcash shill in the pay of Roger Ver. An article in Forbes discovered his secret desire to “walk into a convenience store, get a card and start paying a small fee to start using Bitcoin Cash.” The story quickly went viral in pro-BCH news sites, and bounced back from the BTC echo chamber.

Except for the part where it was, well, wrong. On a second listen to the audio, Vitalik was clearly naming several top cryptocurrencies. It was one of many transcription errors in the Forbes article, which has since been corrected.One would expect that to be enough—but some old-school hodlers still haven’t forgiven Vitalik for calling it “Bitcoin Cash.”

Fair enough, but it wouldn’t be the first time though. 🤷‍♂️https://t.co/Lfdqdgbp2Phttps://t.co/3yKsFuStro

— WhalePanda (@WhalePanda) August 16, 2018


Bitcoin Used For Bail

Cryptocurrencies have a new adopter: the criminal justice system. An accused hacker was ordered by a San Francisco court to post his bail in cryptocurrency, according to Palo Alto’s Daily Post.

Martin Marsich, 25, was ordered to post $750,000 in “Bitcoin or any other cryptocurrency” as a condition for his release into a halfway house. Marsich is charged with hacking into Electronic Arts, which is considered a crime outside of the PC Gaming community.

The Post reports mixed feelings from within the legal community, with some professionals skeptical and others unsurprised. “The judge could order just about anything,” US District Attorney Abraham Simmons told the Post. “What the objective is is to get the defendant to comply with an order to appear later.”

But this raises big question about the wisdom, or otherwise, of trusting a court bond officer with very technical instruments.What if the court sends your bail to a Bitcoin Cash address, or they fail to use 2FA and lose everything?


AT&T Sued For a Quarter Billion

Speaking of two-factor authentication, one investor learned the hard way that Google is the way to go. Michael Terpin is suing AT&T, his mobile service provider, after an identity theft that allowed unknown hackers to make off with $24 million in cryptocurrency.

“AT&T does not improve its protections even though it knows from numerous incidents that some of its employees actively cooperate with hackers in SIM swap frauds by giving hackers direct access to customer information and by overriding AT&T’s security procedures,” Terpin’s lawyers wrote in the 69-page complaint. Terpin is pursuing $24 million in compensation, and $200 million in punitive damages.

The theft appears to be a version of SIM swapping, in which criminals trick phone providers into porting the victims’ phone numbers to new SIM cards.

These attacks appear to be on the rise among sophisticated hackers. Last month, police arrested a 20-year old college student for SIM hijacks that stole $5 million in cryptocurrency.

The best way to avoid such hacks is by using in-device authentication, like Authy, and hardening your mobile phone accounts.

The author is invested in Bitcoin, Bitcoin Cash, and Ethereum.

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