In this issue:
By: Diana J. Stern
With the help of a major technology firm, the company that supplies jet engines to over half of the global airline industry created a production blockchain pilot, using a custom-built fork of Ethereum, to track and trace the engines – a product for which quality is critical and ownership can change hands over time. The goal is for a consortium of industry partners to use the system, internally known as TRUEngine, to track the provenance of engine parts from the moment of manufacturing. Another enterprise blockchain platform for provenance, AURA, was announced this week by ConsenSys, a major luxury brands holding company, and a large technology company. The Quorum-based platform is the result of a traceability program launched three years ago. At one end, the system provides track-and-trace for raw materials, and at the other, customers can use an app to request an AURA certificate of authenticity.
In government adoption news this week, Switzerland’s national post is working with blockchain and IoT company Modum on a device, ThermoCare, that uses a permissioned blockchain to track the temperature of shipments such as food and pharmaceuticals while they are in transit. The rationale for using a permissioned blockchain is that the data has to stay within Switzerland and meet bank security requirements.
There were a number of developments in digital identity this week. A multinational technology company launched Ion, an infrastructure for decentralized identifiers (DIDs) that uses the Bitcoin blockchain. DIDs are used in a number of emerging identity solutions that aim to place control over user data back in the hands of the users themselves. Also this week, Hyperledger added a new identity project, Aries. It is not a blockchain, nor an application, but rather an infrastructure that aims to enable peer-to-peer messaging, interoperability between different blockchains and distributed ledgers, as well as the exchange of blockchain-based data. The Aries tools include an encrypted messaging system, cryptographic wallet and an implementation of the Decentralized Key Management System being incubated in Hyperledger Indy.
In other news, this week the Enterprise Ethereum Alliance released two new specifications: a set of standard APIs for off-chain trusted computation, and a new version of the EEA client specification. The former received contributions from EEA members including two large technology firms, a major bank and ConsenSys.
While supply chain solutions continue to populate the enterprise blockchain landscape, Gartner warns that 90% of them will suffer “blockchain fatigue” by 2023. According to analysts, many will not pass the pilot phase due to the overall immaturity of the technology, overly ambitious expectations, and misunderstandings about how blockchains can and cannot support supply chain management, as well as a lack of standards.
Finally, a recent Forbes article detailed how enterprises including major coffee, grocery and retail chains are allowing users to pay using an app called Spedn, which accepts cryptocurrency. According to the report, a coffee purchase on Spedn for which the end user provided Gemini Dollars was successful, but none of the app’s clients confirmed their participation in the launch.
For more information, please refer to the following links:
- Codename ‘TRUEngine’: GE Aviation, Microsoft Reveal Aircraft Parts Blockchain
- LVMH, ConsenSys and Microsoft announce AURA, a consortium to power the luxury industry with blockchain technology
- Swiss Post Partners With Blockchain Startup on Temperature Monitoring Shipments Solution
- Microsoft Launches Decentralized Identity Tool on Bitcoin Blockchain
- Announcing Hyperledger Aries, infrastructure supporting interoperable identity solutions!
- Ethereum Consortium Launches New Enterprise Tools With Input From Microsoft, Intel
- Starbucks, Nordstrom And Whole Foods Now Accept Bitcoin. Just Don’t Ask Them
- Gartner Predicts 90% of Blockchain-Based Supply Chain Initiatives Will Suffer ‘Blockchain Fatigue’ by 2023
By: Brian A. Bartish
As of this week, the World Bank and Commonwealth Bank have enabled secondary market trading recorded on the blockchain for bond-i (blockchain operated new debt instrument), the first bond to be created and managed through its life cycle using blockchain. According to a press release, this new development marks a significant step for bond-i since its first issuance in August 2018, and helps demonstrate the potential for blockchain to make the process of raising capital and trading securities more efficient and transparent. In related news, a leading multinational professional services firm and an investment firm specializing in digital assets recently released a joint report detailing results of research into 100 of the largest global cryptocurrency hedge funds. The report found that despite the volatility of the cryptocurrency market in 2018, cryptocurrency funds showed surprising success at fundraising, with median assets under management (AuM) growing approximately three-fold as of Q1 2019 from the median AuM at fund launch in January 2018.
The ICO market is seeing a significant slump, according to research by cryptocurrency exchange BitMEX, with Q1 2019 returns at $40 million, down 97% from the same time period in 2018. As returns on ICOs flounder, some projects are opting to rebrand as initial exchange offerings (IEOs). However, an SEC senior advisor recently warned that U.S.-based exchanges that facilitate IEOs may be in violation of the law if they do not comply with applicable licensing requirements for broker-dealers, alternative trading systems or national securities exchanges.
This week, the SEC initiated cease-and-desist proceedings with Canada-based NextBlock Global Ltd. and its owner Alex Tapscott, co-author of the book Blockchain Revolution, for falsely representing that as many as four prominent members of the blockchain community were acting as advisors to NextBlock in order to facilitate fundraising. Noting remediation efforts undertaken by NextBlock and a settlement agreement with the Ontario Securities Commission that required NextBlock to pay $700,000 CAD, the SEC issued a civil penalty of $25,000 against Tapscott.
For more information on this week’s post, please see the links below:
- World Bank and CBA Partner to enable Secondary Bond Trading recorded on Blockchain
- PwC: 2019 Crypto Hedge Fund Report
- Research: ICO Market Down Almost 100% From a Year Ago, Raised $40 Million in Q1 2019
- SEC’s Crypto Czar Says Exchanges That List IEOs May Face Legal Risks
- In the Matter of NEXTBLOCK GLOBAL LTD. and ALEX TAPSCOTT
- SEC Slaps Blockchain Author Alex Tapscott, Firm With Fines Over Securities Violations
Late last week, The Financial Crimes Enforcement Network (FinCEN) published FIN-2019-G001, which contains new guidance discussing how FinCEN regulations related to money services businesses apply to certain business models involving convertible virtual currencies (CVCs). On the same day, FinCEN issued FIN-2019-A003, an advisory that highlights suspicious activity and red flags associated with the exploitation of CVCs for money laundering, sanctions evasion and other illicit financing purposes.
Also last week, nine individuals connected to an “SIM Hijacking” group were charged with conspiracy to commit wire fraud and aggravated identity theft in the Eastern District of Michigan. SIM Hijacking involves hacking a phone number to exploit “two-factor authentication” and intercept text messages with the security codes required to access the target’s bank or cryptocurrency accounts. The defendants allegedly facilitated the SIM Hijacking by bribing an employee of a mobile phone provider or by contacting a mobile phone provider’s customer service posing as the victim. Three of the nine defendants named in the complaint were employees of major mobile phone providers and are reportedly the first telecommunications employees to be indicted in an SIM Hijacking case. In other SIM Hijacking news, late last week a court awarded one of the largest court judgments to an individual in the cryptocurrency space. A cryptocurrency investor won $75.8 million in a civil judgment against a 21-year-old who used SIM Hijacking to steal 3 million crypto tokens, worth roughly $23.8 million at the time, from his cellphone account in early 2018.
According to recent reports, two American companies that claimed to help victims regain access to their computers after a ransomware attack by using the latest technology regularly made bitcoin ransom payments to hackers and passed off the costs to the victims. Payments by one of the companies were reportedly traced to bitcoin wallets that are now banned by the U.S. Treasury Department due to sanctions against Iran. In some instances, the victims that unknowingly pay the ransom through these companies are public agencies ‒ thus taxpayer money may be providing support to cybercriminals in U.S.-sanctioned countries.
To read more about the topics covered in this week’s post, see the following:
- Advisory on Illicit Activity Involving Convertible Virtual Currency
- Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies
- Nine Individuals Connected to a Hacking Group Charged With Online Identity Theft and Other Related Charges
- AT&T Contractors and a Verizon Employee Charged With Helping SIM Swapping Criminal Ring
- S. investor awarded $75 million in cryptocurrency crime case
- Firms That Promised High-Tech Ransomware Solutions Almost Always Just Pay the Hackers